Ideas for your ISA: three tracker fund picks
ISA season, the time of year savers are encouraged to use up their tax-free ISA allowance before the 5 April deadline, is in full swing.
You can save a maximum of £15,240 in ISAs in the 2015/16 tax year, which runs from 6 April 2015 to 5 April 2016. You can put the whole amount in a cash ISA, the whole amount in a stocks and shares ISA or split your money between the two.
If you are putting some or all of your money into a stocks and shares ISA, you may want to consider index tracker funds.
These products are growing in popularity with investors because they are simple and cheaper than actively managed funds.
Tracker funds mirror, or track, a particular index of shares or bonds, such as the FTSE 100.
In most core sectors, investors can access tracker funds with annual charges under 0.10%.
Adam Laird, passive investment manager at Hargreaves Lansdown, says: “Tracker funds are probably the most straightforward investment for a stocks and shares ISA. In one trade you can buy a whole portfolio. Because they track an index there is no risk of choosing a failing fund manager.”
Tracker funds had a record 2015, with investors ploughing more than £5bn into the products last year. According to Hargreaves Lansdown, currently £1 in every £8 is invested in a tracker fund.
If you’re thinking of putting some of your savings into a tracker, here are Hargreaves Lansdown’s three top picks:
Legal & General UK Index
A one-stop shop for UK shares. Tracking the FTSE All Share index, this fund covers over 600 large, medium and small companies. The Legal & General team has a straightforward approach and this fund has tracked accurately.
HSBC FTSE 250 Index
For more adventurous investors, the FTSE 250 covers mid and smaller companies. These companies are “more British” than larger shares which tend to be multinational. The FTSE 250 has been the top UK index for most of the last 15 years.
Legal & General US Index
The US is a top market for tracker fund investors, as most active managers fail here. It’s a major market and the USA still looks economically strong. This fund tracks the FTSE USA index, covering over 600 shares including many global leading companies.