This is our September 2020 update of the cheapest index trackers for British investors. If you’ve checked out this page before then know the main action this time is in the gold, UK gilts, total global bond, developed world, and emerging market equity categories.
Also, I’ve chucked out the UK value and global value categories and replaced them with dividend income picks instead. Sometimes you just have to go with the flow.
ETFs continue to drive down costs. There’s a few categories now where the lead ETF is half as cheap as its nearest rival, or has forced competitors to slash their costs, too.
Amundi has put serious pressure on the developed world and UK mid cap categories by choosing cheaper Solactive indexes rather than the big-name FTSE and MSCI alternatives.
Invesco has forced the pace in the short and intermediate gilt categories, and new entrants have livened up the total global bond category – no doubt anticipating yield-hungry investors sniffing around for any alternative to negative interest rates!
Lower costs – that’s the name of the game for passive investors. Performance is unpredictable and elusive, but costs are nailed on. They nibble away at your returns like a satanic mouse – harmless enough at first, until you realise all your cheese has gone.
As Morningstar puts it:
If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision.
That’s why I try to leave no penny un-pinched when searching for cheap funds.
As a passive investor, I concentrate mostly on index funds and Exchange Traded Funds (ETFs). That’s because they are the simplest cut-price vehicles available. However, some asset classes aren’t well served by index trackers, so I’m happy to use low cost active funds to fill the breach.
My picks are based purely on price as measured by the Ongoing Charge Figure (OCF). There are other factors to consider when buying a fund (like tracking error, liquidity, and size) so it’s always worth reading any documentation to make sure it fits your bill.
Identifying tickers or ISIN codes are given in brackets. If there are any other wrinkles worth mentioning, I’ll throw them in along the way.
Finally, if you’re looking for the cheapest place to buy and hold these funds then take a butcher’s at our online broker comparison table.
The UK’s cheapest index trackers
Right, let’s grab some bargains!
Note: Anything not labelled ETF or ETC will be an index fund. Codes are given for accumulation funds variants where available. We don’t include platform exclusive funds – they’re generally not a good deal overall.
UK large cap equity
- HSBC FTSE All Share Index Fund Institutional (GB0030334345) OCF 0.02%
- Lyxor Core Morningstar UK ETF (LU1781541096) OCF 0.04%
- L&G UK Equity ETF (IE00BFXR5R48) OCF 0.05%
- Fidelity Index UK Fund P (GB00BJS8SF95) OCF 0.06%
- HSBC FTSE All Share Index Fund C (GB00B80QFX11) OCF 0.06%
- Vanguard FTSE UK All Share Index Unit Trust (GB00B3X7QG63) OCF 0.06%
The L&G ETF has a socially responsible investing (SRI) remit.
UK mid cap equity
- Amundi Prime UK Mid and Small Cap ETF (PRUK) OCF 0.05%
- Vanguard FTSE 250 ETF (VMID) OCF 0.1%
- L&G UK MID Cap Index Fund I (GB00BQ1JYX87) OCF 0.14%
UK small cap equity
There are no good tracker options in the UK small cap asset class for DIY investors – the iShares ETF is more of an expensive FTSE 250 tracker. The rest are active funds and shown as a selection of what’s available rather than a comprehensive survey.
- Schroder Institutional UK Smaller Companies Fund (GB0007893984) OCF 0.51%
- iShares MSCI UK Small Cap ETF (CUKS) OCF 0.58%
- JP Morgan UK Smaller Companies Fund (GB0031835001) OCF 0.6%
- Baillie Gifford British Smaller Companies B Fund (GB0005931356) OCF 0.67%
UK equity income
- Vanguard FTSE UK Equity Income Index Fund (GB00B59G4H82) OCF 0.14%
- WisdomTree UK Equity Income ETF (WUKD) OCF 0.29%
- SPDR S&P UK Dividend Aristocrats ETF (UKDV) OCF 0.3%
World equity – developed world and emerging markets (total world)
- HSBC FTSE All-World Index Fund C (GB00BMJJJF91) OCF 0.13%
- Vanguard FTSE All-World ETF (VWRL) OCF 0.22%
- Vanguard LifeStrategy 100% Equity Fund (GB00B41XG308) OCF 0.22%
- Vanguard FTSE Global All Cap Index Fund (GB00BD3RZ582) OCF 0.23%
- Fidelity Allocator World Fund W (GB00B9777B62) OCF 0.25%
Vanguard LifeStrategy and Fidelity Allocator invest in other index trackers. Fidelity invests in REITs and small caps.
World equity – developed world only
- Amundi Prime Global ETF (PRIW) OCF 0.05%
- L&G Global Equity ETF (LGGG) OCF 0.1%
- Fidelity Index World Fund P (GB00BJS8SJ34) OCF 0.12%
- Lyxor Core MSCI World ETF (LCWL) OCF 0.12%
- Vanguard FTSE Developed World ETF (VHVG) OCF 0.12%
- SPDR MSCI World ETF (SWLD) OCF 0.12%
The L&G ETF has an SRI remit.
World ex-UK equity
- L&G International Index Trust I Fund (GB00B2Q6HW61) OCF 0.13%
- Vanguard FTSE Dev World ex-UK Equity Index Fund (GB00B59G4Q73) OCF 0.14%
- Aviva Investors International Index Tracking SC2 Fund (GB00B2NRNX53) OCF 0.25%
- Xtrackers FTSE All-World ex-UK ETF (XWXU) OCF 0.4%
You can also pick ‘n’ mix using individual US, Europe ex-UK, Japan, and Pacific ex-Japan trackers.
World income equity
- Vanguard FTSE All-World High Dividend Yield ETF (VHYL) OCF 0.29%
- Xtrackers MSCI World High Dividend Yield ETF ETF (XDWY) OCF 0.29%
- iShares MSCI World Quality Dividend ETF (WQDS) OCF 0.38%
- Vanguard Global Equity Income Fund (GB00BZ82ZW98) OCF 0.48%
The Vanguard fund is active but gives you a non-ETF option.
World small cap equity
- L&G Global Small Cap Index Fund (IE00BG0VVG79) OCF 0.2%
- Vanguard Global Small-Cap Index Fund (IE00B3X1NT05) OCF 0.29%
- iShares MSCI World Small Cap ETF (WSML) OCF 0.35%
Emerging markets equity
- ComStage MSCI Emerging Markets ETF (E127) OCF 0.14%
- HSBC MSCI Emerging Markets Index ETF (HMEF) OCF 0.15%
- iShares Emerging Markets Equity Index Fund (GB00B84DY642) OCF 0.18%
Socially responsible investing
- L&G UK Equity ETF (IE00BFXR5R48) OCF 0.05%
- L&G Global Equity ETF (LGGG) OCF 0.1%
- HSBC Emerging Market Sustainable Equity ETF (HSEF) OCF 0.18%
- Vanguard ESG Developed World All Cap Equity Index Fund (IE00B76VTN11) OCF 0.2%
The SRI (or ESG) options above are meant to enable you to build a complete SRI portfolio, as opposed to listing the top three or so funds with the lowest OCF from any old category.
- JPMorgan Global Equity Multi-Factor ETF (JPLG) OCF 0.19%
- Invesco Global ex UK Enhanced Index Fund Y (GB00BZ8GWR50) OCF 0.23%
- HSBC Multi Factor Worldwide Equity ETF (HWWA) OCF 0.25%
- Amundi ETF Global Equity Multi Smart Allocation Scientific Beta ETF (SMRU) OCF 0.4%
- iShares Edge MSCI World Multifactor ETF (FSWD) OCF 0.5%
All factor based investing is effectively straying into active management territory – you hope that the chosen subset of the market can outperform. The important thing is to choose products underpinned by sound financial theory, a verifiable set of rules, and a commitment to low costs.
Regional ETFs are available but we’ve stuck to global multifactor products for simplicity.
Property – UK
- iShares UK Property ETF (IUKP) OCF 0.4%
- iShares MSCI Target UK Real Estate ETF (UKRE) OCF 0.4%
- No index fund alternative
Property – global
- iShares Global Property Securities Equity Index Fund D (GB00B5BFJG71) OCF 0.17%
- L&G Global Real Estate Dividend Index Fund I (GB00BYW7CN38) OCF 0.2%
- Amundi ETF FTSE EPRA/NAREIT Global ETF (EPRA) OCF 0.24%
- SPDR Dow Jones Global Real Estate ETF (GBRE) OCF 0.4%
The SPDR ETF includes emerging markets exposure.
- L&G All Commodities ETF (BCOM) OCF 0.15%
- Invesco Bloomberg Commodity ETF (CMOD) OCF 0.19%
- Lyxor Commodities Thomson Reuters/CoreCommodity CRB TR ETF (CRBL) OCF 0.35%
- Invesco Physical Gold A ETC (SGLP) OCF 0.15%
- WisdomTree Physical Swiss Gold ETC (SGBX) OCF 0.15%
- iShares Physical Gold ETC (SGLN) OCF 0.15%
Gold trackers are Exchange Traded Commodities (ETCs).
UK Government bonds – intermediate duration
- Invesco UK Gilts ETF B (GLTA) OCF 0.06%
- Vanguard UK Government Bond ETF (VGOV) OCF 0.07%
- iShares Core UK Gilts ETF (IGLT) OCF 0.07%
- Lyxor Core FTSE Actuaries UK Gilts ETF (GILS) OCF 0.07%
- iShares UK Gilts All Stocks Index Fund (GB00B83HGR24) OCF 0.11%
UK Government bonds – long
- Vanguard UK Long-Duration Gilt Index fund (GB00B4M89245) OCF 0.12%
- SPDR Barclays Capital 15+ Year Gilt ETF (GLTL) OCF 0.15%
- iShares Over 15 Years Gilts Index Fund (GB00BF338G29) OCF 0.16%
UK Government bonds – short
- Invesco UK Gilt 1-5 Year ETF (GLT5) OCF 0.06%
- Lyxor FTSE Actuaries UK Gilts 0-5Y ETF (GIL5) OCF 0.07%
- iShares UK Gilts 0-5 ETF (IGLS) OCF 0.07%
UK Government bonds – index-linked
- Lyxor Core FTSE Actuaries UK Gilts Inflation-Linked ETF (GILI) OCF 0.07%
- iShares £ Index-Linked Gilts ETF (INXG) OCF 0.10%
- iShares Index Linked Gilt Index Fund D (GB00B83RVT96) OCF 0.11%
- Vanguard UK Inflation Linked Gilt Index Fund (GB00B45Q9038) OCF 0.12%
Total global bonds hedged to £ (government and corporate)
- iShares Core Global Aggregate Bond ETF (AGBP) OCF 0.1%
- SPDR Bloomberg Barclays Global Aggregate Bond ETF (GLAB) OCF 0.1%
- Vanguard Global Aggregate Bond ETF (VAGS) OCF 0.1%
- Vanguard Global Short Term Bond Index Fund (IE00BH65QG55) OCF 0.15%
- Vanguard Global Bond Index Fund (IE00B50W2R13) OCF 0.15%
All hedged back to Sterling.
Global inflation-linked bonds hedged to £
- Xtrackers Global Inflation Linked Bond ETF (XGIG) OCF 0.25%
- Royal London Short Duration Global Index Linked Fund M (GB00BD050F05) OCF 0.27%
- L&G Global Inflation Linked Bond Index Fund I (GB00BBHXNN27) OCF 0.25%
- Smith & Williamson Global Inflation Linked Bond Fund X (IE00B7RG6563) OCF 0.27%
- Royal London Global Index Linked Fund Z (GB00B53R4H74) OCF 0.36%
- ASI Short Duration Global Inflation Linked Bond Fund (GB00BP25RB79) OCF 0.46%
All hedged back to Sterling, short and intermediate options. Royal London, ASI and Smith & Williamson funds are active.
UK corporate bonds
- Vanguard UK Investment Grade Bond Index Fund (IE00B1S74Q32) OCF 0.12%
- iShares Corporate Bond Index Fund (GB00B84DSW83) OCF 0.12%
- iShares Core £ Corporate Bond ETF (SLXX) OCF 0.2%
Concluding thoughts on low-cost trackers
If you’re new to passive investing then it might seem like you now have a lot of decisions to make after reading all that.
This piece on designing your own asset allocation will help you construct your own portfolio. If you want a quick shortcut then you can do a lot worse than picking a fund-of-funds instant portfolio solution.
We only update this list periodically. Quoted OCFs may date, as fund groups fight their turf wars by undercutting each other (hurrah!) but this article should still prove an excellent starting point for your research.
If anyone comes across any better index tracker options I’d love to hear about them in the comments below.
Take it steady,
Note: Some comments below may refer to an older collection of low cost index trackers. Scroll down for the latest thoughts.