ISA ideas: low-cost index tracker fund options

If you want to invest in a stock market, index-tracking funds offer a low-cost option. Rather than rely on a fund manager to actively pick a portfolio of shares, an index tracker replicates the performance of an index.

This passive approach is cheaper to operate and therefore the charges are lower. Actively managed funds typically charge around 0.75% a year; passively managed funds often cost less than 0.10% a year.

Index funds mirror all manner of markets and investment types. Most commonly they track the stock market of a specific country, such as the FTSE 100, the UK’s largest companies, or the S&P 500 of the US. They also commonly pull together multiple markets into one fund. 

They are typically held in a Stocks and Shares ISA, Self-invested Personal Pension (SIPP) or an investment account.

There are 14 index-tracking funds on our Select 50 list of favoured funds covering a wide variety of regions and investment types.

Here’s a closer look at four index funds from this list that focus on the UK, US and global stock markets.

1. iShares Core FTSE 100 

This fund tracks the FTSE 100 index which is made up of the 100 largest companies by value listed in London. 

Its primary holdings includes the likes of Shell, AstraZeneca, HSBC, Unilever and BP. These companies are based in the UK but also operate internationally. This characteristic means the index and the fund has more of an international bent.

The fund, run by giant investment firm BlackRock, is a cheap way to access the FTSE 100 with a 0.10% ongoing annual charge. 

2. Vanguard FTSE 250 ETF 

This fund is an exchange-traded fund that tracks the FTSE 250 - an index focused on smaller to medium sized UK companies and therefore better reflects the health of the British economy providing you exposure to the domestic UK economy.

Company holdings include JD Wetherspoon, Currys and Direct Line Insurance.

The fund’s ongoing charge is 0.10% a year. 

3. Vanguard S&P 500 ETF

This fund provides a cheap and easy way to invest in the US stock market by tracking the popular S&P 500 index. It provides access to the world’s largest technology companies including Apple, NVIDIA, Microsoft, Amazon and Facebook-owner Meta.

The fund has a 0.07% ongoing charge.

4. Legal & General Global Equity Index

L&G is a big player in index-tracking funds with a well-regarded capability. Its global equity fund backs a range of the world’s markets based on their size. That means a large amount is allocated to the US - currently 68% - compared to 8.1% in the eurozone and 5.6% in Japan. The allocation and holdings of each fund can be found on the ‘portfolio’ tab on the relevant data page.  

Our platform charge

On top of the ongoing cost of the funds, Fidelity charges a competitive fee for holding your funds. This is typically 0.35% a year (or 0.20% on larger portfolios). However, for shares and ETFs, fees are capped at £90 a year (£7.50 a month). Bear in mind that funds are free to buy and sell but ETFs and shares are subject to a dealing charge of £7.50.

• Find out more about fees and charges

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