This is our list of low-cost index funds and ETFs that’s kept updated to enable investors to find the cheapest index trackers available in the UK.

You can select from these funds to build a diversified portfolio that – as part of a passive investing strategy – will help you achieve your investing objectives.

We focus on value and cost in this list because crushing charges is a core component of wise investing. Every pound you save in fees is a pound that snowballs over the years – speeding you towards your financial goals.

Our piece on management fees explains how even small savings add up to a big difference.

The growing recognition of the importance of investment fees has driven explosive growth in low-cost index funds and Exchange Traded Funds (ETFs) over the past 20 years.

We believe these two types of index tracker are the best value investment vehicles available in the UK and the right choice for passive investors.

Low-cost index funds UK – the Total Cost of Ownership

Our cheapest tracker fund UK list is divided into the key sub-asset classes you may wish to invest in.

The picks per asset class are ranked by their Total Cost of Ownership (TCO).

The TCO is the sum of a fund’s transaction costs and its Ongoing Charge Figure (OCF).

Many outlets will only highlight a fund’s OCF (or Total Expense Ratio). But that misses out a significant chunk of cost embodied by its less well-publicised transaction cost figure.

Transaction costs are the fees and taxes that all investment funds inevitably incur when trading their underlying assets.

We think it’s important to include transaction costs when considering your shortlist. Such charges can rival the OCF in some of the sub-asset classes.

Note: fund costs are a complex and confusing area so we’ve got a few more notes about fees after the main list below.

Note II: we’ve also included the cheapest ESG option for each asset class.

Let’s go hunt for bargains!

Global equity – developed world and emerging markets (All-World)

Cheapest

• SPDR MSCI ACWI ETF (ACWI) TCO 0.12% (OCF 0.12%, Transaction 0%)

Next best

• HSBC FTSE All-World Index Fund C (GB00BMJJJF91) TCO 0.15% (OCF 0.13%, Transaction 0.02%)

• SPDR MSCI ACWI IMI ETF (IMID) TCO 0.18% (OCF 0.17%, Transaction 0.01%)

• Invesco FTSE All-World ETF (FWRG) TCO 0.18% (OCF 0.15%, Transaction 0.03%)

• iShares MSCI ACWI ETF (SSAC) TCO 0.2% (OCF 0.2%, Transaction 0%)

• Vanguard ESG Global All Cap ETF (V3AB) TCO 0.26% (OCF 0.24%, Transaction 0.02%)

World equity – developed world only

Cheapest

• UBS (Irl) ETF – MSCI World (WRDA) TCO 0.1% (OCF 0.1%, Transaction 0%)

Next best

• iShares Developed World Index Fund D (IE00BD0NCL49) TCO 0.12% (OCF 0.12%, Transaction 0%)

• SPDR MSCI World ETF (SWLD) TCO 0.12% (OCF 0.12%, Transaction 0%)

• Fidelity Index World Fund P (GB00BJS8SJ34) TCO 0.12% (OCF 0.12%, Transaction 0%)

• Franklin FTSE Developed World ETF (DWLD) TCO 0.12% (OCF 0.09%, Transaction 0.03%)

• iShares Developed World Fossil Fuel Screened Index Fund (GB00BFK3MT61) TCO 0.13% (OCF 0.12%, Transaction 0.01%)

World ex-UK equity

Cheapest

• Vanguard FTSE Dev World ex-UK Equity Index Fund (GB00B59G4Q73) TCO 0.15% (OCF 0.14%, Transaction 0.01%)

Next best

• L&G International Index Trust I Fund (GB00B2Q6HW61) TCO 0.16% (OCF 0.13%, Transaction 0.03%)

• Aviva Investors International Index Tracking SC2 Fund (GB00B2NRNX53) TCO 0.25% (OCF 0.25%, Transaction 0%)

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

World ex-US equity

Cheapest

• Xtrackers MSCI World ex-USA ETF (XMWX) TCO 0.16% (OCF 0.15%, Transaction 0.01%)

World income equity

Cheapest

• Xtrackers MSCI World High Dividend Yield ESG ETF (XZDW) TCO 0.25% (OCF 0.25%, Transaction 0%)

Next best

• Vanguard FTSE All-World High Dividend Yield ETF (VHYG) TCO 0.32% (OCF 0.29%, Transaction 0.03%)

• iShares MSCI World Quality Dividend ESG ETF (WQDS) TCO 0.41% (OCF 0.38%, Transaction 0.03%)

• WisdomTree Global Quality Dividend Growth ETF (GGRG) TCO 0.42% (OCF 0.38%, Transaction 0.04%)

• Vanguard Global Equity Income Fund (GB00BZ82ZW98) TCO 0.56% (OCF 0.48%, Transaction 0.08%)

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

World small cap equity

Cheapest

• UBS (Irl) ETF – MSCI World Small Cap Socially Responsible (WSCR) TCO 0.24% (OCF 0.23%, Transaction 0.01%)

Next best

• HSBC MSCI World Small Cap ESG ETF (HWSS) TCO 0.27% (OCF 0.25%, Transaction 0.02%)

• Vanguard Global Small-Cap Index Fund (IE00B3X1NT05) TCO 0.34% (OCF 0.3%, Transaction 0.04%)

• iShares MSCI World Small Cap ETF (WLDS) TCO 0.36% (OCF 0.35%, Transaction 0.01%)

US large cap equity

Cheapest

• SPDR S&P 500 ETF (SPXL) TCO 0.03% (OCF 0.03%, Transaction 0%)

Next best

• Lyxor Core US Equity ETF (LCUS) TCO 0.04% (OCF 0.04%, Transaction 0%)

• JPMorgan BetaBuilders US Equity ETF (BBSU) TCO 0.04% (OCF 0.04%, Transaction 0%)

• Amundi S&P 500 II ETF (SP5L) TCO 0.05% (OCF 0.05%, Transaction 0%)

• L&G US Equity ETF (LGUG) TCO 0.05% (OCF 0.05%, Transaction 0%)

• iShares S&P 500 ETF (I500) TCO 0.06% (OCF 0.06%, Transaction 0%)

• iShares US Equity Index Fund D (GB00B5VRGY09) TCO 0.06% (OCF 0.05%, Transaction 0.01%)

• HSBC American Index Fund C (GB00B80QG615) TCO 0.06% (OCF 0.06%, Transaction 0%)

• Fidelity Index US Fund P (GB00BJS8SH10) TCO 0.06% (OCF 0.06%, Transaction 0%)

• iShares US Equity ESG Index Fund D (GB00BN090C90) TCO 0.07% (OCF 0.05%, Transaction 0.02%)

The tax treatment of US equities gives synthetic ETFs a tax advantage over physical funds. Find out more in our Best S&P500 ETFs and index funds article.

UK large cap equity

Cheapest

• iShares UK Equity Index Fund D (GB00B7C44X99) TCO 0.08% (OCF 0.05%, Transaction 0.03%)

Next best

• Fidelity Index UK Fund P (GB00BJS8SF95) TCO 0.09% (OCF 0.06%, Transaction 0.03%)

• Vanguard FTSE UK All Share Index Unit Trust (GB00B3X7QG63) TCO 0.11% (OCF 0.06%, Transaction 0.05%)

• HSBC FTSE All Share Index Fund Institutional (GB0030334345) TCO 0.15% (OCF 0.1%, Transaction 0.05%)

• iShares UK Equity ESG Index Fund D (GB00BN08ZV03) TCO 0.18% (OCF 0.05%, Transaction 0.13%)

• SPDR FTSE UK All Share ETF (FTAL) TCO 0.23% (OCF 0.2%, Transaction 0.03%)

• Amundi UK Equity All Cap ETF (LCUK) TCO 0.25% (OCF 0.04%, Transaction 0.21%)

UK equity income

Cheapest

• Vanguard FTSE UK Equity Income Index Fund (GB00B59G4H82) TCO 0.26% (OCF 0.14%, Transaction 0.12%)

Next best

• L&G Quality Equity Dividends ESG Exclusions UK ETF (LDUK) TCO 0.43% (OCF 0.25%, Transaction 0.18%)

• SPDR S&P UK Dividend Aristocrats ETF (UKDV) TCO 0.48% (OCF 0.3%, Transaction 0.18%)

Emerging markets equity

Cheapest

• Amundi MSCI Emerging Markets ETF (LEMA) TCO 0.14% (OCF 0.14%, Transaction 0%)

Next best

• Northern Trust Emerging Markets Custom ESG Equity Index Fund (IE00BJ0X8418) TCO 0.19% (OCF 0.18%, Transaction 0.01%)

• HSBC MSCI Emerging Markets ETF (HMEC) TCO 0.19% (OCF 0.15%, Transaction 0.04%)

• Fidelity Index Emerging Markets Fund P (GB00BHZK8D21) TCO 0.21% (OCF 0.2%, Transaction 0.01%)

• Amundi Index MSCI Emerging Markets SRI PAB ETF (AMEG) TCO 0.24% (OCF 0.16%, Transaction 0.08%)

Property – global

Cheapest

• VanEck Global Real Estate ETF (TREG) TCO 0.25% (OCF 0.25%, Transaction 0%)

• L&G Global Real Estate Dividend Index Fund I (GB00BYW7CN38) TCO 0.25% (OCF 0.22%, Transaction 0.03%)

Next best

• HSBC ETF FTSE EPRA/NAREIT Developed ETF (HPRS) TCO 0.28% (OCF 0.24%, Transaction 0.04%)

• iShares Environment & Low Carbon Tilt Real Estate Index Fund D (GB00B5BFJG71) TCO 0.3% (OCF 0.18%, Transaction 0.12%)

• Amundi ETF FTSE EPRA/NAREIT Global ETF (EPRA) TCO 0.31% (OCF 0.24%, Transaction 0.07%)

Multi-factor – global

Cheapest

• JPMorgan Global Equity Multi-Factor ETF (JPLG) TCO 0.2% (OCF 0.19%, Transaction 0.01%)

Next best

• Invesco Global ex UK Enhanced Index Fund Z (GB00BZ8GWT74) TCO 0.31% (OCF 0.23%, Transaction 0.08%)

• Franklin Global Equity SRI ETF (FLXG) TCO 0.34% (OCF 0.32%, Transaction 0.02%)

• Invesco Quantitative Strategies ESG Global Equity Multi-Factor ETF (IQSA) TCO 0.38% (OCF 0.3%, Transaction 0.08%)

• HSBC Multi-Factor Worldwide Equity ETF (HWWA) TCO 0.4% (OCF 0.25%, Transaction 0.15%)

• Amundi ETF Global Equity Multi Smart Allocation Scientific Beta ETF (SMRU) TCO 0.42% (OCF 0.4%, Transaction 0.02%)

Factor investing is effectively straying into active management territory. 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 multi-factor low-cost index funds for broad diversification.

Money market – GBP

Cheapest

• Lyxor Smart Overnight Return ETF (CSH2) TCO 0.09% (OCF 0.09%, Transaction 0%)

Next best

• BlackRock ICS Sterling Liquidity Fund (IE00B43FT809) TCO 0.1% (OCF 0.08%, Transaction 0.02%)

• Fidelity Cash Fund (GB00BQRGFD05) TCO 0.1% (OCF 0.1%, Transaction 0%)

• Royal London Short Term Money Market (GB00B8XYYQ86) TCO 0.1% (OCF 0.1%, Transaction 0%)

• Xtrackers GBP Overnight Rate Swap ETF (XSTR) TCO 0.1% (OCF 0.1%, Transaction 0%)

Money market funds are actively managed.

UK Government bonds – intermediate

Cheapest

• Invesco UK Gilts ETF (GLTA) TCO 0.06% (OCF 0.06%, Transaction 0%)

Next best

• iShares GiltTrak Index Fund (IE00BD0NC250) TCO 0.08% (OCF 0.08%, Transaction 0%)

• iShares Core UK Gilts ETF (IGLT) TCO 0.08% (OCF 0.07%, Transaction 0.01%)

• Fidelity Index UK Gilt Fund P (GB00BMQ57G79) TCO 0.1% (OCF 0.1%, Transaction 0%)

• Amundi UK Government Bond ETF (GILS) TCO 0.11% (OCF 0.05%, Transaction 0.06%)

UK Government bonds – long

Cheapest

• iShares Over 15 Years Gilts Index Fund (GB00BF338G29) TCO 0.15% (OCF 0.15%, Transaction 0%)

Next best

• SPDR Bloomberg Barclays 15+ Year Gilt ETF (GLTL) TCO 0.16% (OCF 0.15%, Transaction 0.01%)

• Vanguard UK Long-Duration Gilt Index Fund (GB00B4M89245) TCO 0.17% (OCF 0.12%, Transaction 0.05%)

UK Government bonds – short

Cheapest

• L&G UK Gilt 0-5 Year ETF (UKG5) TCO 0.06% (OCF 0.06%, Transaction 0%)

• Invesco UK Gilt 1-5 Year ETF (GLT5) TCO 0.06% (OCF 0.06%, Transaction 0%)

Next best

• iShares UK Gilts 0-5 ETF (IGLS) TCO 0.07% (OCF 0.07%, Transaction 0%)

• JPMorgan BetaBuilders UK Gilt 1-5 yr ETF (JG15) TCO 0.1% (OCF 0.07%, Transaction 0.03%)

• Amundi UK Government Bond 0-5Y ETF (GIL5) TCO 0.14% (OCF 0.05%, Transaction 0.09%)

• iShares Up to 10 Years Gilts Index Fund (GB00BN091C65) TCO 0.15% (OCF 0.15%, Transaction 0%)

UK Government bonds – index-linked

Cheapest

• L&G All Stocks Index Linked Gilt Index Trust C (GB00BG0QNY41) TCO 0.08% (OCF 0.08%, Transaction 0%)

Next best

• Amundi UK Government Inflation-Linked Bond ETF (GILI) TCO 0.11% (OCF 0.07%, Transaction 0.04%)

• iShares Index Linked Gilt Index Fund D (GB00B83RVT96) TCO 0.11% (OCF 0.11%, Transaction 0%)

• iShares Up to 10 Years Index Linked Gilt Index Fund D (GB00BN091H11) TCO 0.13% (OCF 0.13%, Transaction 0%)

UK index-linked funds may not be suitable for your portfolio due to embedded real interest risk. We switched in our Slow and Steady portfolio to a short duration global index-linked fund, hedged to GBP. For those, see below.

The iShares Up to 10 Years Index Linked Gilt Index Fund is relatively new but the best inflation-hedge from the selection above as it’s the shortest duration GBP linker fund available.

Global inflation-linked bonds hedged to £ – short

Cheapest

• Abrdn Short Dated Global Inflation-Linked Bond Tracker Fund B (GB00BGMK1733) TCO 0.12% (OCF 0.12%, Transaction 0%)

Next best

• Amundi Global Inflation-Linked 1-10Y Bond ETF (GISG) TCO 0.2% (OCF 0.2%, Transaction 0%)

• Royal London Short Duration Global Index Linked Fund M (GB00BD050F05) TCO 0.27% (OCF 0.27%, Transaction 0%)

The Royal London fund is actively managed.

Global government bonds hedged to £

Cheapest

• Abrdn Global Government Bond Tracker Fund B (GB00BK80KQ76) TCO 0.14% (OCF 0.14%, Transaction 0%)

Next best

• UBS JP Morgan Global Government ESG Liquid Bond ETF (EGOG) TCO 0.18% (OCF 0.18%, Transaction 0%)

• iShares Overseas Government Bond Index Fund D (GB00BN091P94) TCO 0.18% (OCF 0.13%, Transaction 0.05%)

• Amundi Index JP Morgan GBI Global Govies ETF (GOVG) TCO 0.21% (OCF 0.15%, Transaction 0.06%)

Gold

Cheapest

• Amundi Physical Gold ETC (GLDA) TCO 0.12% (OCF 0.12%, Transaction 0%)

• Invesco Physical Gold A ETC (SGLP) TCO 0.12% (OCF 0.12%, Transaction 0%)

• WisdomTree Core Physical Gold ETC (GLDW) TCO 0.12% (OCF 0.12%, Transaction 0%)

• Xtrackers IE Physical Gold ETC (XGDU) TCO 0.12% (OCF 0.12%, Transaction 0%)

• iShares Physical Gold ETC (SGLN) TCO 0.12% (OCF 0.12%, Transaction 0%)

Gold trackers are Exchange Traded Commodities (ETCs). These are functionally index trackers like ETFs, only they’re focused on commodities investing.

Broad commodities

Cheapest

• Xtrackers Bloomberg Commodity Swap ETF (XCMC) TCO 0.19% (OCF 0.19%, Transaction 0%)

Next best

• L&G All Commodities ETF (BCOM) TCO 0.21% (OCF 0.16%, Transaction 0.05%)

• iShares Diversified Commodity Swap ETF (COMM) TCO 0.25% (OCF 0.19%, Transaction 0.06%)

• WisdomTree Broad Commodities ETF (COMX) TCO 0.29% (OCF 0.19%, Transaction 0.1%)

• Invesco Bloomberg Commodity ETF (CMOP) TCO 0.34% (OCF 0.19%, Transaction 0.15%)

• L&G Longer Dated All Commodities ETF (CMFP) TCO 0.34% (OCF 0.3%, Transaction 0.04%)

• iShares Bloomberg Enhanced Roll Yield Commodity Swap ETF (ROLL) TCO 0.34% (OCF 0.28%, Transaction 0.06%)

• UBS (Irl) ETF CMCI Composite SF (UC15) TCO 0.34% (OCF 0.34%, Transaction 0%)

We’ve written a much more nuanced take on choosing a commodities ETF. Sometimes cheapest isn’t best.

Using our cheapest index funds UK list

You can precisely identify the low-cost index funds you want to research via the ISIN codes or ETF tickers shown in our list in brackets. (We’ve previously explained how fund names work.)

We’ve given the code for the GBP-priced accumulation fund flavour where available. Income distributing versions are also usually offered. Make sure you understand the ins and outs of accumulation vs income funds.

Also note:

• We’ve included an Environmental, Social, and Governance (ESG) index tracker option for each sub asset-class where available.
• Actively managed funds are featured when low-cost index funds are not available. Active funds are noted in the relevant sections.
• We don’t show platform exclusive index trackers. They’re generally not a good deal overall.

Cheap index trackers and costs – extra detail

The bid-offer spread is an additional cost you may incur that isn’t captured by the TCO figure above.

This charge shouldn’t be significant for most passive investors anyway1 but you can gauge it by using the estimated spread published by Hargreaves Lansdown on its fund pages.

The final significant investing cost you’ll need to pay are broker fees. We track those on our broker comparison table.

Watch out for FX fees charged by brokers on certain funds. This is a stealth cost that’s quite avoidable.

Some providers of synthetic ETFs publish a ‘swap fee’ on top of the TER. Just add the swap fee to the TER to get the Ongoing Charge Figure. This is how we’ve treated swap fees in the listing above.

It’s worth knowing that a fund’s transaction costs can fluctuate quite a lot from period to period, especially if there’s excessive turnover in the fund’s index. So don’t feel like you instantly need to switch if your fund’s transaction costs suddenly spike.

Keep your fund and its main rivals under review for up to a year before coming to any definitive conclusions about its competitiveness.

Some index trackers register negative transaction costs, but I’ve disregarded that from the TCO calculations above. That’s because negative transaction costs amount to an accounting technique that’s not sustainable over time.

Low-cost index funds UK – fees you can ignore

Don’t pay any attention to a fund’s Annual Management Charge (AMC). The AMC is an old-fashioned fee metric that excludes important fund costs. This is why a fund’s AMC is typically lower than its OCF or TER.

Do not add the AMC to the OCF or TER.

The OCF and TER are interchangeable, however, so choose one of those costs (the highest) and add it to the fund’s transaction cost to calculate its TCO.

Treat negative transaction costs as zero.

Ignore entry and exit charges for index trackers where you see them mentioned in fund literature such as Key Investor Information Documents. Such fees do not apply to ordinary investors like you and me. They are levied on institutional participants dealing directly with the fund provider.

The same thing goes if you see an eye-watering minimum purchase figure (such as £100,000) to buy into a fund.

Be guided by your broker’s minimum purchase amount.

Final 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 written a few pieces to help you resolve tie-breaker situations:

• Comparing funds
• Why tracking difference is important
• How to choose index trackers
• Best global tracker funds
• How to choose a bond fund
• Best bond funds
• Choosing a commodities ETF
• Best S&P 500 ETFs and index funds

If you’re looking for the cheapest place to buy and hold your low-cost index funds then do take a gander at our broker comparison table.

Our article on designing your own asset allocation will help you construct your portfolio. If you want a quick shortcut, you could do a lot worse than checking out our best multi-asset fund picks for an instant portfolio solution.

We update this list periodically. Quoted TCOs 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 then please shout in the comments below.

Take it steady,

The Accumulator

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

1. Wide spreads are more typically an issue with individual company shares. [↩]

What caught my eye this week.

I noticed UK commercial property giant Landsec posted decent first-half results this week.

CEO Mark Allan reckons:

“…property values have stabilised, with growth in rental values driving a modest increase in capital values, resulting in a positive total return on equity.

We expect these trends to persist, as customer demand for our best-in-class space remains robust and investment market activity has started to pick up.”

After four miserable years, things might be looking up for the owners of offices and retail parks.

Is this because fewer people are still working from home, new office supply has cratered, interest rates have stopped going up, or enough of the weaker players have thrown in the towel?

All of the above, I imagine.

But Landsec (ticker: LAND) shares still trade at a 30% discount to net assets, even as those asset values have stabilised. In other words it’s early days and the market is yet to be convinced.

What normally happens next is economic growth reaccelerates, office space tightens, increasingly marginal offices are built, discounts narrow and eventually maybe even turn to a premium, chubby guys in hard hats appear in the Sunday papers touted as ‘the new builders of Britain’, bank lending gets sloppy as the good years roll on, euphoria is misidentified as robust business confidence, and only when a shock finally hits us and the music stops do we discover who borrowed too much.

It could be different this time. Maybe because of WFH. Maybe because of AI. Perhaps self-driving cars will rewrite geography.

It usually feels like something special is going on that could change the game.

Mostly though – big picture – it doesn’t.

The political big dipper

You see the same thing playing out in the wider economy – and more viscerally in this year’s politics.

In the Financial Times John Burn-Murdoch notes how voters globally have punished whoever is in power:

Like everyone and his dog I have my theories about why Trump won the presidency and the Tories lost. There’s a bull market in competing explanations.

The US result is especially perplexing – even terrifying – given how confused voters seem to have been.

In an excellent review of why Trump triumphed, Kyla Scanlon reminds us:

People think that violent crime rates are at all-time highs, that inflation has still skyrocketed, that the market is at all-time lows, and that unauthorised border crossings are at all-time highs.

None of those are true – it’s all the opposite. But those misinformed views informed how people voted.

In blind polling Republicans actually preferred the policies of Kamala Harris! Yet one narrative gaining traction among a certain ilk of terminally online ‘bros’ is that this election saw voters ‘liberated’ from the ‘gatekeepers’ of ‘mainstream media’.

That’s true in as much as many voters believed – and voted on the back of – unrealities that fitted their priors.

Bring back the media gatekeepers, I say.

Tracing the source

Given the universal slap in the face of incumbent parties though, we might do better to look for the global driver of voter unrest, rather than gaze too closely at the minutia of America’s psychodrama.

Inflation must be the culprit. People hate it, and they felt it everywhere.

Partly because global supply chain disruption is – doh – global. But also because everyone suffered through the same pandemic.

For various reasons – natural and mandated – economies cratered in 2020 due to Covid. Many businesses were at risk of going bust, and households of going bankrupt.

People seem to have already forgotten this graph:

Mass unemployment faced the authorities that grim spring. In response they deployed vast support packages and/or stimulus and paid citizens to stay at home. Easier money kept firms on life support.

It worked to prevent a slump. But one way or another – and aided by Russia’s invasion of Ukraine – it eventually gave us inflation a couple of years later, and then higher interest rates to knock the inflation back.

It’s perplexed onlookers that despite a peerlessly strong US economy with record low unemployment and a soaring stock market, voters complained of living through economically awful times.

Few of them now seem to recall those job losses – far less think about the counterfactual of a depression if nothing had been done.

They see much higher prices, feel poorer (despite higher wages in most cases), and rage.

What have you done for me lately

Would they have preferred high unemployment to high inflation?

The trade-off would never have been so simple. But yes, I think many secretly would have.

For most people, unemployment happens to the other guy. In contrast we all feel the pain of inflation.

For now at least the cycle has turned again, and inflation is subdued.

True, swingeing tariffs in the US might upset that soon. But until then, every day people get a little more used to prices at these levels, and they begin to forget what they were so cross about.

Why are interest rates so high anyway, they ask.

Inflation is low. Don’t these central bankers know ANYTHING?

Master market

For those of us who breath the markets, these cycles turn at double-speed. Wheels within wheels.

The markets are like a nervous cabin boy, dashing about a ship that’s steadily forging through the surf.

The ship makes its stately way, over time passing through fine waters, choppy seas, storms, and worse.

But the cabin boy lives out all of those scenarios many times every day in his head.

He sees cyclones from every mast, yelps at the slightest swell, and yet he also wants to break out the rum for a party the moment the sun shines.

Every day is an adventure ride of ups and downs! With enough time however even the stock market’s scatterbrained progress looks inevitable.

Take a moment to remember all the drama of the past five years. Then look at this graph:

Golden years

The funny thing is I didn’t start this ramble to reinforce that equities eventually go up: don’t worry, be happy.

In fact I was going to highlight the latest data on how US equity valuations are getting into rarified air – truly Dot Com Bubble-type multiples.

But like everyone else we’ve been saying similar all year. The US market has climbed on anyway. Even the Trump Bump seems nothing special on that graph above.

I know it’s hard to imagine US stocks not being the only game in town. So it might be an instructive to read this Sherwood article about how gold has actually beaten US equities since the late 1990s.

According to Deutsche Bank data:

The asset of the new millennium has been gold, delivering a real return of 6.8% per year since the end of 1999 despite being a shiny rock that generates no earnings and pays no dividends.

So far, the S&P 500 has averaged total [real] returns of 4.9% over this stretch.

Incredible, no?

So bad were returns from US stocks between 2000 and 2010 that the almighty bull market that began in the rubble of the financial crisis has still barely lifted returns back into ‘adequate’ range.

And US tech in 2010? You could hardly give it away.

Life beyond AI

To return to where I started (thematically on-point, eh) Landsec shares actually fell on its reasonable results.

Because of course they did. Landsec is a forgotten share in a discarded sector that trades on the still mostly-unloved UK stock market.

But it probably won’t always be this way.

Okay – perhaps AI really is ‘all that’, as an ex of mine from the North used to say.

If ChatGPT 2030 can do all our jobs, then presumably we won’t need Landsec’s offices. Nor will most people have money to buy drinks from Diageo (ticker: DGE) or even to buy the houses they browse on Rightmove (ticker: RMV).

Sometimes things really do change. I started including an AI section in the links years ago – before most people had heard of LLMs and all the rest – because of this potential. AI is important because there’s a small chance of something truly seismic, existential even, for humanity.

But there’s no certainty.

Indeed it’s surely more likely that AI is overhyped, that the biggest US tech firms will invest hundreds of billions just to destroy their margins, the US market will accordingly falter, and something else will get a turn on the merry-go-round.

Maybe even boring British shares. After all they’re mostly cheap, pumping out cash, buying back their own stock – and yeah, many could hardly grow more slowly, so the only way is up…

Who knows? Perhaps they’ll be helped along by a global economy that finally forgets the pandemic and frets less about inflation, gets used to interest rates of 4-5% again, and at last goes back to normal.

For a while, at least. Until we go through the wringer again…

Have a great weekend.

[continue reading…]

If you’re anything like me (and if you are, I’m sorry, and have you tried therapy?) then you’re well-acquainted with those online tables of the top savings accounts. But have you considered smaller building societies that might not make these lists?

We all know the drill in 2024. You need somewhere to park your cash. An account with an interest rate that sees your stash nibbled at rather than swallowed up by the Inflation Monster. 

My personal go-to are the tables updated by the Money Saving Expert team. But there are lots of others. Search for ‘top savings rates’, and you’ll get up-to-date results. 

The top scorers are usually online challenger banks. Mostly they’re absolutely fine. Just check any potential candidate has the full FSCS protection of £85,000 – especially if it sounds like something Del Boy threw together in a get-rich-quick scheme.

(“Rodders, what’ll we call our bank? Monzo? Nah – how about Pockit?”)

However I’m going to make the case that you should consider your local building society.

Rate expectations

National building societies (BS) are included in those Best Buy tables, alongside banks new and old.

For instance, top BS picks as I write include…

• Leeds BS (paying 4.67%)
• Yorkshire BS (paying 4.35%)

…which are respectable enough, though they can’t compete with the likes of Trading 212 and Moneybox, which both tout 5.17% right now. (T&Cs apply with all these accounts, and that Trading 212 link is monetised so The Investor may be able to buy an M&S Meal Deal this weekend if you sign-up!)

What the tables might not show you is the best rate offered by your local building society.

And you could be surprised at just how competitive these can be. 

What are building societies?

I think of building societies as slightly more cuddly banks.

Rather than being run for the benefit of shareholders, as banks are, building societies are accountable to their members. And the members are their customers. 

The first society was formed in 1775 in Birmingham, with recognition of the nascent industry coming with The Regulation of Benefit Building Societies Act in 1836. The next 200-odd years saw more legislation and regulation, with the sector hitting its high-water mark in 1986. That year The New Building Societies Act gave them the option to become banks. Over the next few years many did just that.

So don’t be fooled by a local-sounding name from yesteryear – like a fancy surname retained since the Norman conquest – because you may be looking at a bank in sheep’s clothing.

For example, when I was a kid in North East England we had accounts with the Halifax Building Society. But while I was a teenager and wasn’t paying attention, Halifax went to the dark side. It ‘demutualised’ and turned into a bank. Others followed suit.

However not all building societies did the (mis) deed and there are plenty left today.

Surviving building societies tend to have a local focus. They usually have a town or city in their name.

Again though, not always. Nationwide Building Society is, as its name suggests, a nationwide mega-building society. And while the Teachers Building Society says it reserves its best rates specifically for teachers, anyone else is also welcome to open an account.

Beware the bankers

I’m not saying all banks are sharks nor that all building societies are cuddly teddy bears. That’s not true.

In fact I tend to err on the side of believing that every big organisation is out to get me.

I’m just saying that these days my local Halifax branch won’t let you go to a counter unless you’ve first run the gauntlet of three different iPad-wielding staff members – each time announcing your financial business to every curious onlooker perched nearby on the soft-play sofas.

My mother’s been trying to make it to the counter of Halifax for two years. 

Kafka would be taking notes.

What are the advantages of building societies?

Sometimes building societies have savings rates that equal the top online banks, and mortgage offerings that are just as good or better than other brokers. Other times they come close.

My point is they are definitely worth checking out. Yet they don’t often show up in comparison sites or tables. You have to do the leg-work yourself.

The good news is that you don’t always have to live nearby. These days most building societies have useful websites. Some – like Yorkshire BS and Leeds BS – enable you to open accounts online even if you don’t live in the area.

And yet… there’s also a case for getting up from your sofa (did I hear you actually gasp there?) and wandering along to your local high street to have a chat with the building society folks.

Assuming you a) have a local high street that isn’t derelict and b) have a building society with a building.

Field report

The last time I went out exploring – to open a cash ISA at my local building society – I was armed with info from its website, only to be told: “Oh, those were yesterday’s figures. This morning’s issue of the account has a higher interest rate”.

So I came out happier than I expected. A rare situation in dealing with banks, I’ve found.

They sometimes chat to you, too. You can go in, sit in the warm for a bit, and talk to someone about money. There’s a coffee machine in the corner. They’ll occasionally offer you a cup while you wait.

People really seem happier in my local building society. It’s like a weird banking utopia.

Do building societies have any disadvantages compared to banks?

Building societies don’t have as much to offer as banks. They’ll do savings accounts (including ISAs) and mortgages, but many don’t do more than that.

If you want a current account and lots of additional features, you’ll probably have to look elsewhere.

Building societies aren’t usually a one-stop-shop then. They’re more targeted at a particular strand of your financial management.

Also, their online offerings can be pretty limited. You might be able to check your account online, for instance, but not actually move your money around much without going into a branch. For some people that’s a huge disadvantage.

However I find that the relative simplicity of building societies works well for me in some situations.

For instance, last month I gave my 12-year-old son his first prepaid card. He was off on a school trip abroad – don’t even get me started on how much that cost – to a country that doesn’t use cash very much. The kids were advised to take a card for buying snacks and souvenirs. 

Naturally getting my son equipped wasn’t a smooth process. I had to get a card for myself too, so that I had a parent account for the child account. (And ever since I did, it’s been spamming me with ads for ‘easy investing’ and ‘want to buy gold?’).

But eventually both cards were set up. My son now has a card loaded with donations from his grandparents to take on his trip.

Slower and steadier saving and spending

The worrying thing is that my son loves his card. He carries it everywhere he goes. I think he’d sleep with it if I let him.

Sometimes he stops by McDonalds on his way home from school to buy a drink just because, he says, “It’s fun to use the card”. 

Okay, I can see why. You select something on the big shiny ordering machine, tap your card, and like magic somebody brings you a large Sprite Zero. That was science fiction when I was twelve.

But the money doesn’t seem real to him. The can of Sprite does, but the cash that paid for it is just a number that changes on a phone screen. For those of us who are old and grey (just a bit grey in my case, honest), it’s easy to make the connection. But for kids growing up in an increasingly virtual world, it’s different.

The building society approach counters that. It slows things down.

If his grandmother gives my son a £20 note, I’ll take him to the building society with his passbook. He hands in the £20, his book gets stamped, and he can see the physical money transferred to a number on the page. If he wants to do anything with that money, he has to go into the building society and ask.

There are levels of checks that slow down the immediacy of spending. As a parent I like that a lot.

Why I like to support my building society

There are other benefits to using your local building society

As already mentioned, in my neighbourhood the benefit is physical branches. My local BS – Newcastle Building Society, if you’re interested – hasn’t just hung on to a high street presence where banks have fled. It’s actually expanding its operations, opening new physical branches around the region. 

Then there’s the community side. 

Building societies can offer some interesting services. My local branch, for instance, provides a meeting room that you can book free of charge. I was so impressed by the offer that I immediately started trying to think of people I could assemble for an official meeting of some kind. (It didn’t work, of course – there’s nobody in my town who wants to meet with me except my cousins. And I’ve been crossing the street to avoid them for years.)

Now, I don’t know anything about high-level finance. I’m just a regular person in a regular town, doing regular shopping in a run-down high street that has more nail bars than banks.

But it seems to me that building societies are becoming increasingly attractive to people because they’re looking at what their customers want, rather than trying to tell their customers what they should want.

BSs: no BS

There’s no denying I’m a dinosaur about a lot of things. 

I don’t have the new Vanguard app. (Why would I want to check my investments on the bus?)

I resent the ubiquity of QR codes. (If I have to scan a QR code for your information, then I don’t want your information).

My approach to change can be best described as ‘grumpy’. 

So maybe I’m missing the advantages of our kids being born digital. Perhaps my views will change in a few years, when newer and more terrifying forms of progress make tappable cards look like Victorian slates. Maybe I’m alone in liking a passbook that can be stamped.

But in this age of online everything, in which you need two-factor authentication to change your socks, I find it strangely comforting to have an account that tucks my money away without any online tinkering.

I don’t think that I am alone. My building society has big posters advertising their use of passbooks, and apparently they attract a lot of new customers. My parents moved their savings from the bank to a building society when their bank phased out passbooks.

Lots of regular people resent it when the relentless march of progress whisks away a system that worked for them.

Anybody else still miss video tapes? Nobody?

Alright, I’m a dinosaur. But there are other dinosaurs out there too.

And in the dinosaur community, building societies are our happy place.