Tracker Fund

What is a tracker fund?

A tracker fund is a fund that tracks a market index (a list of companies). It’s another name for an index fund. Same thing, different label.

The fund “tracks” the index by buying everything in it. If the FTSE 100 contains 100 companies, the tracker owns all 100. If the index goes up 5%, the fund goes up roughly 5%.

What can you track?

Almost any index. Common choices include:

• FTSE 100. The 100 largest UK companies
• FTSE All-Share. Around 600 UK companies
• S&P 500. The 500 largest US companies
• FTSE All-World. Thousands of companies globally

A global tracker gives you exposure to companies worldwide in a single fund.

Why use a tracker fund?

Low fees. No one is paid to pick investments, so tracker funds typically charge 0.03% to 0.20% a year. That’s 30p to £2 for every £1,000 invested.

Most fund managers who try to beat the market fail over the long term. Tracker funds don’t try to beat it. They just match it.

How do you buy a tracker fund?

Through an investment platform (a company that holds your investments), inside an ISA or SIPP.

Tracker funds come in two forms: OEICs and ETFs. OEICs are easier for monthly investing. ETFs trade on the stock exchange like shares.

Key points about tracker funds

• Same as an index fund, just a different name
• Tracks a market index. No one picking stocks
• Low fees, often under 0.20% a year
• Available as OEICs or ETFs