Best FTSE 100 Tracker Investment Funds: Our 5 Top Picks

If you are looking for inspiration for investing in the FTSE 100, we have put together 5 of the UK’s lowest cost investment tracker funds you might want to consider.

We also outline some of the features you should look for an index tracker and some of the factors to consider when selecting an investment platform for the fund you invest in.

All of the funds featured below can be put in an ISA, junior ISA or Self Invested Pension (SIPP) or as a direct investment from £25 per month.

1. iShares 100 UK Equity Index

Invest From
£25 per month or £100 single
Fund

iShares 100 UK Equity Index

Income Yield
5.09%*
Income Paid Bi-annually
ISA, SIPP & Direct Investment

Our view: This is a super low cost FTSE 100 tracker with a 0.06% pa annual charge. The aim of the Fund is to seek to achieve capital growth for investors by tracking closely the performance of the FTSE 100 Index by investing in companies in the Index.  Income generated is reinvested.

*Historic yield correct as at 30/6/2020

Important information: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

2. Legal & General UK 100 Index Trust

Invest From
£25 per month or £100 single
Fund

L&G UK 100 Index Trust

Income Yield
4.70%*
Income Paid Quarterly
ISA, SIPP & Direct Investment

Our view: This is a super low cost FTSE 100 tracker with a 0.06% pa annual charge after a 0.04% discount if you invest via Hargreaves Lansdown. This fund tracks the FTSE 100 index of the largest companies on the UK stock market. Lots of these companies are big multinationals that make most of their money overseas. So even though it only invests in UK companies, investors get exposure to the global economy too. Legal & General has a large and experienced team. They keep their costs low and have done a good job of performing similarly to the index to date. Income generated is reinvested.

*Historic yield correct as at 30/6/2020

Important information: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

3. HSBC ETFS PLC FTSE 100 UCITS ETF

Invest From
£25 per month or £100 single
Fund

HSBC ETFS PLC FTSE 100 UCITS ETF

Income Yield
5.83%*
Income Paid Bi-annually
ISA, SIPP & Direct Investment

Our view: This is a super low cost FTSE 100 tracker with a 0.07% pa annual charge. The investment objective of the Fund is to replicate the performance of the FTSE 100 Index (the “Index”), while minimising as far as possible the tracking error between the Fund’s performance and that of the Index. Income generated is reinvested.

*Historic yield correct as at 30/6/2020

Important information: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

4. iShares Core FTSE 100 UCITS ETF

Invest From
£25 per month or £100 single
Fund

iShares Core FTSE 100 ETF

Income Yield
5.10%*
Income Paid Quarterly
ISA, SIPP & Direct Investment

Our view: This is a super low cost FTSE 100 tracker with a 0.07% pa annual charge. The product has a record of tracking its benchmark to a high degree of accuracy and scored ahead of rivals on this measure. Income generated is reinvested.

*Historic yield correct as at 30/6/2020

Important information: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

5. Vangard FTSE 100 UCITS ETF

Invest From
£25 per month or £100 single
Fund

Vanguard FTSE 100 UCITS ETF

Income Yield
4.23%*
Income Paid Quarterly
ISA, SIPP & Direct Investment

Our view: This is a super low cost FTSE 100 tracker with a 0.09% pa annual charge. The Fund attempts to: 1. Track the performance of the Index by investing in all constituent securities of the Index in the same proportion as the Index. Where not practicable to fully replicate, the Fund will use a sampling process. 2. Remain fully invested except in extraordinary market, political or similar conditions. Income generated is reinvested.

*Historic yield correct as at 30/6/2020

Important information: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

What is a FTSE 100 tracker fund?

A tracker fund or exchange traded funds (ETFs) are investments that look to mirror the performance of a particular market index. They are passive investments and aim to replicate the movement of an index and deliver returns that are closely matched to the index being tracked. With a fund or ETF that tracks the FTSE 100 your returns will reflect the performance of the top 100 UK firms by capitalisation that make up the index.

How does a FTSE 100 index tracker work?

Tracker funds and ETFs work by:

  • Full Replication – physically buying shares of the 100 companies that make up the FTSE 100 or by
  • Partial replication – using more complex investments to replicate the movement in the index.

What is tracking error in a FTSE 100 index tracker fund?

Each of the funds listed above employ a “passive” investment strategy designed to replicate the performance of the FTSE 100 index. Some tracker funds attempt to fully replicate the index by holding all of the constituent shares in approximately the same proportion as their weighting in the index. Other tracker funds use an index sampling process holding a representative sample of shares which approximate to the full index mirroring key risk factors and other characteristics.

Tracking error measures the volatility of the return difference between the fund and the FTSE 100 index. It is calculated as the standard deviation of the tracking difference between the tracker fund and the index (gross of fees for the trailing 36-month period, or since the fund’s inception if it does not have 36 months of performance history).

A low tracking error means a index tracker fund is following closely the performance of the FTSE 100 Index. The tracking error gives you a measure of how closely the fund is replicating the FTSE 100.

With index tracker finds which are passively managed generally the lower the tracking error the better.

What is the cheapest way to invest in a FTSE 100 index tracker fund?

One of the attractions of investing in tracker funds is that because they are passive investments where no fund manager is involved the annual ongoing costs are much lower than managed fund equivalents. Over time the impact of annual charges can have a significant impact on your investment value, so tracker funds are a great way to get low cost exposure to the stock market.

A way to compare funds based on cost is to contrast the OCF (Ongoing Charge Figure) which represents the total annual cost of running the fund including administrative costs.

Below we have selected 3 Top Low Cost FTSE 100 Tracker Funds:
iShares 100 UK Equity Index

OCF – 0.06%

Tracking error: 0.11 (over 3 years)

Legal & General UK 100 Index Trust

OCF – 0.06%

Tracking error: 0.12 (over 3 years)

HSBC ETFS PLC FTSE 100 UCITS ETF

OCF – 0.07%

Tracking error: 0.07 (over 3 years)

What is the best investment platform to use for a FTSE 100 tracker fund?

Today’s investor in 2020 has a lot of options to choose from.  One of the key considerations is cost. However picking the “cheapest” is not as simple as it sounds, as each platform has its own costing model which often makes it difficult to compare like for like. Below we have outlined what can expect to pay in charges for 4 of the UK’s largest most popular investment platforms based on investing in a low cost tracker fund (iShares Core FTSE 100 UCITS ETF).

Investment PlatformAnnual Platform FeeiShares OCF
Fund Charge
Annual Charge
on £10,000
Annual Charge
on £20,000
Annual Charge
on £40,000
Annual Charge
on £100,000
Annual Charge
on £250,000
Interactive Investor£9.99 pm flat fee0.7%£126.88£133.88£154.88£189.88£294.88
Hargreaves Lansdown0.45% up to £249,999, reducing
to 0.25% from £250,000 to £1m,
reducing to 0.10% from £1m to £2m.
No fee for assets over £2m
0.7%£52£104£208£520£1,300
AJ Bell0.25% on first £250K0.7%£32£64£128£320£800
Fidelity0.35% from £7,500 to £249,999,
reducing to 0.2% from £250,000
to £1m. No fee for assets over £1m
0.7%£42£84£164£420£675

As you can see the right platform for you will depend on how much you are investing.

Other considerations include:

  • How easy is the platform to use and what tools and research is on offer
  • What fund discounts are there? different platforms have negotiated different discounts on funds
  • Customer reviews – useful in understanding strengths and weaknesses of platform providers
  • Level of customer service provided

Undecided on your options?

When it comes to making investment decisions using the services of a qualified independent investment adviser may be worth considering.

Most IFAs will offer a free no obligation initial discussion. A good adviser based on what you are looking to achieve will put together a plan for your situation.

We have partnered with an organisation Unbiased UK who will help you find a qualified adviser in your area. Find an investment adviser »

 

Important Risk Information:

This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.

Different types of investment carry different levels of risk and may not be suitable for all investors. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Written by Editorial Team ,
5th August 2020