Tracker funds can be some of the safest investments out there, especially if you’re looking for a long term haven for your money, but low risk can mean low returns.
These come in two flavours: OEICS (Open-Ended Investment Companies) unit trusts and Exchange Traded Funds (ETFs). While the unit trusts are generally more expensive with charges ranging up to 1% annually, ETFs can cost just 0.2% of your investment.
ETFs are also easier to trade, which makes them ideal for an ISA or retirement fund. The key here is to choose cheap tracker funds with low fees for consistent returns.
Compare Our Top 10 UK Investment Accounts
Here are our top five for 2018:
1. Legal & General UK 100 Index
We’ll kick off our list off with a cheap, cheerful and relatively safe fund that, purchased through Hargreaves Lansdown, will cost less than 0.1% of your investment annually.
More importantly, it’s performed incredibly well this year with a 12.16% return.
While this is down from more than 19% in 2016, even if it sees more downside due to Brexit concerns, it should still generate a nice return, considering the high rate of return now, and how little it costs to invest in the fund.
But if Brexit is still a worry for you, here’s one that should limit any downside potential.
This is a passively run unit trust of index trackers with, as the title suggests, 20% exposure to equities and the rest in fixed interest.
Significantly, the Vanguard fund is globally diversified so offers good protection from the as yet unknown impact of Brexit on your precious portfolio.
If you want to diverge slightly from passive investments, one option is a ‘smart’ tracker.
These combine active decision-making with a traditional passive strategy, but because they’re more complex, they can also be more costly.
However, since they use various metrics and mechanisms to try to outperform the markets, they can be worth it.
One worth looking at is the Ossiam ETF which tracks the Shiller Barclays CAPE Sector Europe index. Barclays has partnered with investment manager, Ossiam, to develop an ETF using Prof. Robert Shiller’s famous CAPE ratio (Cyclically Adjusted Price to Earnings) to measure how expensive a market or share is over time.
Using this methodology the team follows an index based on what they reckon to be the four cheapest sectors with the best momentum.
4. iShares EURO STOXX 50 UCITS ETF
Europe performed well in 2017 and with positive economic fundamentals, improved earnings and GDP upgrades are forecast for 2018, there’s plenty still to excite investors.
One factor to look out for here could be potential increases in the ECB interest rate, which would see investors steer away from growth companies, in favour of value.
One cheap ETF is the iShares EURO STOXX 50, loaded with undervalued French and German companies.
If you think that US companies will benefit from Trump’s infrastructure investments in 2018, then here’s a fund with a slightly different approach.
This ETF ranks the 1000 largest US companies according to earnings, dividends and balance sheet strength.
There’s a charge of 3.9%, but this investment has seen an accelerating rate of return since September and looks to have further to go.Last updated: January 12th, 2018