What are the best low-cost index funds to save for retirement?

Q. What are the best low-cost index funds for retirement?

Great question. Index funds, also known as tracker funds, come with great appeal because of their low-cost nature and diversifying properties. They also offer an easy and low cost way to be diversified across lots of different companies and many markets.

Here are 14 index-tracking funds on our Select 50 which cover a wide variety of regions and asset classes. I’ve ordered them in terms of their ongoing charge.

Let’s take a closer look at the top four low-cost index funds on the Select 50, with some insight from our experts:

1. Vanguard S&P 500

This fund is the cheapest index fund on the Select 50, with an ongoing charge of 0.07%. It tracks the widely recognised benchmark of the US stock market, which is comprised of large US companies. The index is a capitalisation weighted index of 500 US stocks.

Its top 10 holdings include some familiar mega corporations, such as Microsoft, Apple, NVIDIA, Amazon, and Google-owner Alphabet.

Our experts like this fund because it invests in large companies listed in the US, therefore the fund provides US dollar exposure. They also highlight that the fund is well priced.

2. iShares Core FTSE 100

This fund tracks the return of the FTSE 100 Index, with an ongoing charge of 0.10%. It offers you exposure to the UK and a variety of large value companies.

Its top 10 holdings include pharma giant AstraZeneca, Shell, HSBC, Unilever, and BP.

Our experts like this fund because BlackRock, the manager of the fund is a seasoned investor in passive funds, plus the fund’s costs are low.

3. Vanguard FTSE 250

This fund tracks the FTSE 250, with an ongoing charge of 0.10%. Most of its stocks include small to medium sized companies, with a focus on value and core styles.

The fund’s top 10 holdings include housebuilder Vistry Group, property firm British Land, investment firm Alliance Trust and high-tech precision instrumentation firm, Spectris.

Our experts like this firm because it is focused on medium-sized companies, which has been an area of good long-term investment returns.

4. Vanguard FTSE Developed Europe ex UK

This fund tracks the FTSE Developed Europe, excluding the UK, with an ongoing charge of 0.10%. It’s made up of stocks of large and mid capitalisation companies in the region.

The fund’s top 10 holdings include exposure to Denmark, Netherlands, Switzerland, France and Germany, from companies like pharma firm Novo Nordisk, food and drink corporation, Nestlé, luxury goods company, Lvmh Moet Hennessy Louis Vuitton and energy firm, TotalEnergies.

Our experts like this fund because it provides broad-based European exposure. They highlight that Vanguard is an expert in index tracking and that the fund is well priced.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. Before investing into a fund, please read the relevant key information document which contains important information about the fund. Eligibility to invest in a SIPP or ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.