We reveal what the most popular low-cost passive investments of the year have been so far among Interactive Investor clients.
Passive funds and exchange traded funds (ETFs) provide a good way of accessing stock markets at low cost. It is possible to track everything from equities to gold or bonds – but what do investors favour the most?
We look at data from our sister website Interactive Investor, to find out what the most-bought passive investments of 2018 have been so far.
The Vanguard LifeStrategy fund range dominated, with three of its five trackers taking the top three spots. The LifeStrategy funds are multi-asset passive funds that invest in various indices, with the equity weighting ranging from 20 per cent to 100 per cent and the balance held in bonds and cash. The Vanguard fund fee is low, at 0.22 per cent.
Top of the most popular passive fund list (so far in 2018) is Vanguard LifeStrategy 80% Equity. The tracker has 34 per cent in US equities, 20 per cent UK equities and 14 per cent in global bonds. Over three years this tracker returned 34 per cent, and over one year it returned 8 per cent.
The fact that 80 per cent of this tracker is in equities indicates a relatively bullish preference among investors, particularly given that the second most-bought passive investment has an even larger equity allocation. The Vanguard LifeStrategy 100% Equity has 43 per cent in US equities. It has 25 per cent in UK equities and 13 per cent in Europe ex UK equities. Due to its higher equity allocation, this tracker returned more with 41 per cent over three years, and 11 per cent over one year.
The third most-bought fund was the slightly more cautiously allocated Vanguard Life Strategy 60% Equity. This tracker returned 27 per cent over three years and 6 per cent over one year.
The fourth most-bought tracker fund was Vanguard FTSE Developed World FTSE ex UK. This tracker has 61 per cent in US equities, 10 per cent in Japan, 4 per cent in each France and Germany. It is similarly US-focused as the previous ‘global’ equity funds, but it consciously excludes the UK from being tracked.
The fifth most-bought tracker was Vanguard US Equity Index. This tracker has 24 per cent in the US information technology sector, 15 per cent in financials, and 14 per cent in healthcare.
Given that all the most-bought tracker funds focus on the US market, their largest individual holdings are the biggest constituents of the S&P 500: Apple, Microsoft, Amazon and Facebook.
While most investors still favour the US stock market over the UK stock market, it is worth noting that the FTSE 100 has touched a new record high today, rising above 7800. Despite slow economic growth in the UK, the weaker pound continues to boost the more internationally-oriented blue chips index.
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