etfs

Buying a passive fund does not mean taking a passive approach

There is no hiding it, really – putting together a portfolio that is right for you is complicated, even if you use tracker funds or exchange traded funds, which are often misleadingly called ‘passive’ investments.

It takes considerable work and research to find an investment portfolio you are happy with and that meets your needs. It can help a lot if you speak to a financial planner, but even then, some preparation is recommended.

Why investors should not fixate on falling passive fund fees

Academic finance is now dominated by the ‘efficient market’ hypothesis. Try as they might, the theory goes, active fund managers almost never outperform the market over the long term. Investors, therefore, have no hope of beating the markets, so they are better off sticking their cash in either index trackers or exchange traded funds (ETFs). Acceptance of this theory has played no small part in an explosion in the popularity of passive investing over the past decade.

What you need to look at before investing in a tracker fund or ETF

The growth of the exchange traded fund market is relentless. There are already close to 2,300 products on sale to UK investors, which provide all sorts of market exposures. And the number of ETFs on offer is set to increase, as both long-established players and asset managers looking to enter the ETF space fight for a slice of the pie.

Few can dispute the benefits – chief among them low cost – that ETFs bring to investors. However, product proliferation is making the task of ETF selection rather daunting.

The passive funds and ETFs that pay investors to invest  

Over the past few years, providers of index tracking funds and exchange-traded funds (ETFs) have been engaged in a price war, sending fees to record low levels.

However, the race to the bottom seems to have entered new territory, with some passive products sold to US investors now offering both a zero fee and negative fees.

Hoping for a Brexit bounce? Two cheap ways to track the FTSE All-Share index

It’s hard to think of another event in recent memory causing more uncertainty for UK businesses than Brexit. Following the vote in June 2016, the FTSE All-Share index has underperformed the global benchmark MSCI World by 6.3% in annualised terms.

Some argue this makes UK companies a prime objective for bargain-hunters. However, investing in businesses that are particularly reliant on the health of the British economy remains a risky bet.

Ethical ETFs: there's never been a better time to put your money where your morals are

Investors have historically paid for the privilege of incorporating ethical or environmental, social and governance (ESG) factors into their portfolios, in the form of higher management fees. However, this is changing. The average ongoing charge for an ETF that applies ESG values and/or screens in Europe has fallen year-on-year since 2012 from 0.55% to 0.36%, making them more attractive.

Your Fund Choices 2019: how to order

Your Fund Choices 2019 provides comprehensive analysis on 201 actively managed Rated Funds and Investment Trusts selected by the Money Observer team of experts, as well as 66 passive choices. Every one has been rigorously reassessed to make sure that it still earns its place on the Money Observer Rated Funds shortlist.