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A guide to passive investing in the UK

Are you after an investment strategy that’s simple to understand, easy to implement, and gives you a good crack at beating the average fund manager over the long term?

Then passive investing could well be for you.

Welcome to our passive investing guide for UK investors. Our mission: to explain what you need to know about passive investing and how to do it.

Why passively invest?

With passive investing, you don’t worry about what the price of gold is doing this week. Nor do you spend days buried in company reports trying to evaluate stocks.

There’s no need to time the market, pick winning companies, or convince yourself that you have the special powers required to beat other investors – especially since the vast army of superbly equipped professionals you’re up against can’t reliably outperform, either.

As a passive investor, you refuse to play The City’s game.

Instead you use low-cost funds called index trackers to reap the market’s return and get rich slowly.

We’re fans of passive investing because:

  • There’s a mountain of evidence showing passive investing is a superior strategy compared to believing the latest hot fund manager or investment scheme will smash the market.
  • It can save you from costly mistakes in the pursuit of fatter returns.
  • It’s as simple as investing gets. You need no more than half a dozen funds in a portfolio to spread your money across the key asset classes. You can even get by with just two funds.

Does this all sound too good to be true? Rest assured this isn’t some bizarre offshore saving scheme or whatnot.

Passive investing is increasingly the first choice of savvy investors, with net sales of tracker funds in the UK reaching a record £1.9 billion in 2011 according to figures recently cited by Which.

That brings the total held in tracker funds by UK investors to £39 billion!

The passive investing mindset

But passive investing isn’t just about the types of funds you buy. We think it’s also about how you approach the whole business of achieving your long-term financial goals.

By accepting that successful investing is a long-term pursuit, you mentally equip yourself to cope with the horrendous market crashes that will occur from time to time.

You also come to realise that a diversified portfolio is your best chance of reaching your goals.

Passive investing offers all this and it’s a strategy you can easily manage yourself for only a small investment in time. It enables you to sidestep the ruinous conflicts of interest that riddle the financial services industry, then leaves you to get on with the rest of your life.

Sure, passive investing requires some upfront research to understand. And that’s what the passive investing section of Monevator is dedicated to helping you with.

How passive investing works


Asset allocation – doing it yourself

Model portfolios: Ideas for passive portfolios

How to buy your first index trackers

Cutting costs

The simplest solution of all


How to buy low and sell high – rebalancing


Every investor has to start somewhere, and your start won’t come much better than buying an index fund.

Every journey begins with a single step. And when it comes to asset allocation that first step is working out your investment goals.

Our portfolio slows to a crawl. US valuations predict barren years ahead. Is it time to change course?

The only way for active funds to compete with ever-cheaper passive rivals is to cut costs to the bone. Will they?

An introduction to our fantastic online broker comparison table.

Our passive portfolio is back off the canvas and shrugging off every blow the forces of pessimism can throw at it.

Beware of betting on tips from friends, whether you’re told about a can’t lose cryptocurrency or ‘the next Google’.

Lyxor have launched a stunningly cheap suite of vanilla ETFs. But beware the potential withholding tax and UK reporting status wrinkles!

Our verdict on Beyond The 4% Rule, arguably the first UK retirement investing book.

Our Slow and Steady model portfolio takes a step back in the first quarter of 2018. Hold the smelling salts…

Mr Market has been as easy on us as a camomile cleansing butter this year. Enjoy a rejuvenating rubdown with high returns that soothe like dopamine kisses.

A simple way to help you compare platforms.

The book that’s a godsend for anyone trying to work out how to live off their money in retirement.

Our passive portfolio grinds against the unyielding coalface of global capitalism.

The strong case for index investing is made by a passionate fan of the strategy (who shall be known here as The Accumulator).

A choice of cheap index trackers to help passive investors craft their portfolios