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Low-cost index funds and ETFs that will save you money

This is our updated list of low-cost index funds and ETFs that can help UK investors crush their portfolio costs.

Every pound you save in management fees is a pound that snowballs over the years and speeds you towards your financial goals.

Hammering down charges is therefore absolutely vital. Our piece on management fees [1] explains how even small savings add up to a big difference.

A growing recognition of the central importance of investment fees has driven explosive growth in low-cost index funds and Exchange Traded Funds [2](ETFs) over the past decade or so. These funds are the best value investment vehicles available and the right choice for passive investors [3].

Low-cost index funds and ETFs – how we choose them

Our list is broken down into the main sub-asset classes you may wish to invest in.

The picks per asset class are ordered purely by cost, as measured by the Ongoing Charge Figure [4] (OCF).

There are other factors [5] to consider when buying a low-cost index fund. So it’s always worth reading any documentation to make sure a given fund fits your bill.

You can precisely identify the fund you’re after by using the ISIN codes or ETF tickers we give in brackets.

We’ve occasionally included actively managed options when low-cost index funds are not available. We don’t include platform exclusive funds as they’re generally not a good deal overall.

Right, let’s go grab some bargains!

UK large cap equity

Cheapest

Next best

The L&G ETF has a socially responsible investing (SRI) [7] remit.

UK mid cap equity

Cheapest

Next best

UK small cap equity

There are no good low-cost index funds available for the UK small cap [8] asset class. The iShares ETF listed below is more an expensive FTSE 250 tracker. Our other suggestions are active funds and are shown as a selection of what’s available rather than a comprehensive survey.

Cheapest

Next best

UK equity income

Cheapest

Next best

World equity – developed world and emerging markets (total world)

Cheapest

Next best

Vanguard LifeStrategy and Fidelity Allocator invest in other index trackers. Fidelity invests in REITs and small caps.

World equity – developed world only

Cheapest

Next best

The L&G ETF has an SRI remit.

World ex-UK equity

Cheapest

Next best

You can also pick ‘n’ mix using individual US, Europe ex-UK, Japan, and Pacific ex-Japan trackers.

World income equity

Cheapest

Next best

The Vanguard fund is active but gives you a non-ETF option.

World small cap equity

Cheapest

Next best

Emerging markets equity

Cheapest

Next best

Socially responsible investing

Cheapest

Next best

The SRI (or ESG) options above are meant to enable you to build a complete SRI portfolio, as opposed to us just listing the top three our four funds with the lowest OCF from any old category.

Multi-factor – Global

Cheapest

Next best

All factor investing [10] is effectively straying into active management territory. Essentially, you hope that your 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

Cheapest

Next best

Property – global

Cheapest

Next best

The SPDR ETF includes emerging markets exposure.

All-commodities

Cheapest

Next best

Gold

Cheapest

Gold trackers are Exchange Traded Commodities (ETCs).

UK Government bonds – intermediate duration

Cheapest

Next best

UK Government bonds – long

Cheapest

Next best

UK Government bonds – short

Cheapest

Next best

UK Government bonds – index-linked

Cheapest

Next best

Total global bonds hedged to £ (government and corporate)

Cheapest

Next best

All hedged back to Sterling.

Global inflation-linked bonds hedged to £

Cheapest

Next best

All are short and intermediate options, hedged back to Sterling. Royal London and Sanlam funds are active.

UK corporate bonds

Cheapest

Next best

Concluding thoughts on low-cost index funds and ETFs

There’s often little to distinguish index trackers that are closely matched in price. However we have previously written two pieces to help you resolve tie-breaker situations:

If you’re looking for the cheapest place to buy and hold these funds then take a look at our cheapest broker comparison table [13].

Our article on designing your own asset allocation [14] will help you construct your own portfolio. If you want a quick shortcut, you can do a lot worse than picking a fund-of-funds [15] for an instant portfolio solution.

We 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,

The Accumulator

Note: Some comments below may refer to an older collection of low-cost index trackers. Scroll down for the latest thoughts.