Passive investments – which aim to track an index rather than actively attempt to outperform it – are said to be cheaper alternatives to their fully-managed counterparts.

According to Hargreaves Lansdown, these investments are particularly popular with younger investors, with more than one in six 30-year-olds holding at least one passive investment in their portfolio compared to the overall average of one in nine.

In addition, more than half of new passive investment purchases so far in 2014 were made by investors under 45.

Adam Laird, passive investment manager at Hargreaves, said: “Tracker funds are low cost, straightforward investments. Their simplicity appeals to younger investors who may be starting to build an investment portfolio. Costs have been falling and investors can now access all major bond and equity sectors for an ongoing charge of under 0.25 per cent.”

However, Laird warns that low charges, while appealing, should not be the only consideration.

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He said: “There are dozens of options available and it is important to balance quality with cost. Investors should also consider how the fund replicates its index and whether they lend stock, to gauge risk and how closely it will track its chosen index.”

From 1 July, investors will be able to hold up £15,000 tax free in a new ISA.

Hargreaves Lansdown has created a sample ‘ultra-low cost tracker portfolio’ for investors willing to invest over at least 5 years.

 

	On-going charge	Investment
Legal & General International Index Trust	0.20%	£5,000
Legal & General UK INdex	0.10%	£4,000
BlackRock Emerging Markets Equity Tracker	0.25%	£2,000
BlackRock Pacific ex Japan Equity Tracker	0.15%	£1,000
BlackRock Corporate Bond Tracker	0.12%	£3,000
Total Portfolio	0.16%	£15,000