Look, we talk a lot about active investing. However, there might be part of your portfolio that you really do want passive. That’s perfectly all right. Everyone wants to be able to just casually look at your portfolio every quarter to see where they stand…if they bother to take that much time. How can people spend so little time on their portfolio and still see their money grow modestly? Through index tracker funds, of course.
There are quite a few index tracker funds out there — the goal is to match the performance of an index, a basket of shares that represent part of the stock market as a whole.
A classic index would be the FTSE 100, which tracks progress for the top 100 companies on the London Stock Exchange. There are tons of tracker funds on the market, including specialist ones that let you narrow in on sectors you like — such as biotechnology and pharmaceuticals.
Keep in mind that the tracker isn’t about shattering the returns that the index is putting out. It’s just there to match performance. However, this can be a bad thing — when the market dips, the tracker fund tends to take a beating. This is very much the case in bearish markets where investor sentiment is very volatile.
There are a few things that you want to look for if you’re going to take this tactic.
First and foremost, you want to make sure that you keep your fund dealing fees as low as possible. If you can, go with a fund that has no fees at all involved when you buy and sell funds within your account.
You should also be looking for a tracker with a low annual charge. This means more of your money is there to work for you, not the fund managers. You also want to look and see what options you have. Do you want to branch out into emerging markets? Do you want to stay close to home? Do you want to go international in established markets like the United States? There’s a lot of options waiting for you.
Taking to a professional before you sign up can help you clear up a lot of questions. If you’re going to go with a specific firm over another firm, make sure that you’re asking as many questions as you need answered before you commit to anything. Buyer’s remorse is just a bad idea, and it’s even worse when it comes to something as important as part of your financial future. Good luck!