Tracker funds and your investments

One pound in every ten is invested in a tracker fund.  At Enable our IFA’s have long favoured passive investments and that is essentially what a tracker fund is, tracker funds simply replicate the performance of their chosen index, whether it moves up or down.

A computer programme largely runs tracker funds so there is no expensive fund manager making them very cost effective. The annual charges on a tracker fund range from 0.25pc to 1pc, compared with 1pc plus on many actively managed funds. However, since the implementation of the Retail Distribution Review, fees charged by platforms have made some tracker funds less competitive than they used to be.

Historically in developed markets, tracker funds may beat all but the very best actively managed funds. But with developing markets, the expertise of a fund manager can sometimes be better than an index fund. In a rising bull market, tracker funds tend to do well: but in a bear market the best actively managed funds should in theory beat trackers – because the fund manager can switch the fund’s investments to protect against losses.

But there’s an alternative, cheaper way to track: exchange-traded funds (ETFs) are just like tracker funds but the way they are structured means they are traded like shares. Because of this, ETFs can be cheaper for personal investors than traditional tracker funds as there is usually no added platform fee.  Catherine Penney, a product manager says: “The appeal of ETFs is twofold. Firstly they offer low-cost access to a particular index or market - and this is the overwhelming benefit that has led to their increase in popularity…. Secondly, their transparency: traded like a share, prices are constantly being updated and can be purchased or sold online whenever it suits with full knowledge of the price the trade was placed at.” Enable’s IFA’s in Bishops Stortford can help you keep your investments on track.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE