Tracker funds can be a good bet for savers

May 25, 2019

Enable’s IFA’s in Bishop’s Stortford have always believed trackers are a good bet for savers. When you are planning your portfolio and working on your wealth management a tracker fund tends to offer cheaper fees that can save you a small fortune in the longer term.

Tracker funds were invented by John Bogle, the founder of US investment giant Vanguard who died recently aged 89. He introduced the first index-tracking fund in 1976. His concept was simple: rather than employing a fund manager to actively pick stocks they think will perform well, trackers merely copy an index such as the FTSE 100. The fund will simply reflect the composition of the index in question.

Over the years John Bogle’s innovation has helped savers hold on to thousands of pounds that would otherwise have gone to fund managers in fees. Decades later, tracker funds are widespread and follow the value of a huge range of assets, such as bonds and gold as well as share indexes. But many savers remain unsure of their pros and cons of tracker funds compared with ‘actively managed’ funds.’

The most obvious advantage of tracker funds is that they’re low cost,’ says Tom Stevenson, investment director for personal investing at Fidelity International. The percentage charges of an actively managed fund can seem small, but Stevenson points out it adds up to large sums of your investment over the long term. ‘Assuming the performance of an actively managed fund and a tracker is the same, then the compounded cost of paying an active manager can make a real difference to the end result,’ he says.

The difference may apply to millennials who are beginning to save for their retirement. A fund charging a 0.5 per cent fee over 50 years would turn £1,000 into £9,030, while a fund with a 2 per cent fee would return a meagre £4,380. Enable’s IFAs can help you find the right investments for your portfolio.

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