What is a tracker fund?
Tracker funds definition
Index tracker funds aim to closely track the performance of an index (such as a FTSE 100 tracker fund) by investing in companies within the index they track. Since they are passively managed, they are often more cost-effective than funds which are actively managed by fund managers.
The benefits of index tracker funds
The Annual Management Charge (AMC) for index tracker funds is comparatively lower than for actively managed funds and there is no Stamp Duty to pay. There may be entry charges, so you will need to check a fund's Key Investor Information Document (KIID) for more information on individual charges.
Index tracker funds can give you exposure to entire markets without having to spend time and money buying individual investments; and there's a vast selection of funds to choose from, covering different indices, geographical regions and market sectors. They can be held in Share Accounts, ISAs, Junior ISAs, Child Trust funds and Self-invested Personal Pensions. Performance is easy to monitor and they can be bought and sold each working day at the next available Valuation Point.
In addition to the benefits of exposure to entire markets, diversity of sectors within an index can be broad; so poor performance in one sector can be outweighed by positive performance in another. Also, with a passively managed index tracker fund, you don't have to rely on a fund manager’s stock picking ability!
Lower, medium, or higher risk index tracker funds?
For your convenience, we give all our preferred index tracker funds a risk rating to help you choose according to your own personal attitude to risk. For more information on how we define lower, medium and higher risk invetments, please refer to our investment research policy.