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Best FTSE 100 ETF to Buy Now

If you want to participate in the UK market, then one of the best options for you is investing in an ETF – specifically those that follow the FTSE 100.
Aleksandar Hrubenja
Author: 
Aleksandar Hrubenja
Muze Hasan
Editor: 
Muze Hasan
13 mins
August 30th, 2023
Advertiser Disclosure

By investing in an exchange-traded fund that follows the top 100 companies on the London Stock Exchange, you get an opportunity to significantly diversify your portfolio by minimizing potential risk and maximizing your investments.

In the article below we will find the most important ETFs that follow the FTSE 100, explain how they work, and how you can invest in them.

Best FTSE 100 ETF at a Glance

Fund SizeOngoing chargeNet Asset Value5-year performance
HSBC FTSE 100 UCITS ETF GBP£484.87m0.07%£76.44+3.31%
Lyxor FTSE 100 UCITS ETF - ACC£520.14m0.14%£12.49+3.15%
iShares Core FTSE 100 UCITS ETF GBP (Dist)£10.90bn0.07%£7.53+3.32%
Vanguard FTSE All-World UCITS ETF£13.65bn0.22%£88.25+8.44%
Vanguard FTSE 100 UCITS ETF£4.70bn0.09%£33.59+3.29%
Xtrackers FTSE 100 UCITS ETF 1C£67.86m0.09%£10.8+3.25%

HSBC FTSE 100 UCITS ETF GBP Overview

First, we have an ETF handled by the Hongkong and Shanghai Banking Corporation (HSBC). This London-headquartered universal bank and financial services group has strong ties with East Asia. It is, in fact, one of the most powerful financial groups in the world.

In other words, this fund is handled by people with an exceptional track record. This is clearly shown in the fund's strong growth over the last five years.

Like any FTSE 100 fund, it offers great exposure to your portfolio to high-level companies, across a variety of sectors. Furthermore, UCITS funds are subject to strict regulatory frameworks and investor protection measures, hence, ensuring the safety of your funds.

Top holdings:
  • AstraZeneca PLC

  • Shell PLC

  • HSBC Holdings PLC

  • Unilever PLC

  • BP PLC

Lyxor FTSE 100 UCITS ETF - ACC Overview

Lyxor is known for its commitment to innovation, quality, and transparency. They strive to provide investors with investment solutions that are well-designed, reliable, and backed by solid research and risk management processes.

Just like the top of our list, its UCITS designation means your investment is safe.

Its top holdings are in healthcare, energy, financials, and consumer staples, giving investors access to a wide range of sectors.

While 2021 was a volatile year for this fund, things have significantly stabilized, and seem to be going well further on.

Top holdings:
  • ASTRAZENECA GBP

  • SHELL PLC

  • HSBC HOLDINGS PLC GBP

  • UNILEVER PLC LONDON

  • BP PLC

iShares Core FTSE 100 UCITS ETF GBP (Dist) Overview

The iShares UK Dividend UCITS ETF is designed to focus specifically on dividend-paying stocks in the UK market. It seeks to provide investors with exposure to companies that have a history of consistent dividend distributions.

This fund distributes dividends to its investors, which can serve as a solid stream of passive income.

Furthermore, it's relatively inexpensive, and has a diverse bond maturity breakdown, helping you manage risk and optimize your returns.

Top holdings:
  • AstraZeneca PLC

  • Shell PLC

  • HSBC Holdings PLC

  • Unilever PLC

  • BP PLC

Vanguard FTSE All-World UCITS ETF Overview

This fund is led by the excellent team over at Vanguard.

It is broader than the other funds on our list, due to its focus on the FTSE All-World index, giving it broad and comprehensive coverage of global equity markets.

The fund follows both developed and emerging markets worldwide, and provides a great deal of exposure to your portfolio, more diversification across different regions, and minimises risk.

Top holdings:
  • Apple Inc

  • Microsoft Corp

  • Amazon.com Inc

  • NVIDIA Corp

  • Alphabet Inc

Vanguard FTSE 100 UCITS ETF Overview

The VUKE ETF was one of the most popular funds in late 2022, and its competitive expense ratio is proof enough.

The fund has an excellent track record when it comes to delivering returns. Furthermore, its expense ratio, which we already mentioned, is lower than what you would expect from similar funds.

Note that any dividends generated by the fund are further reinvested into the fund. This negates the possibility of gaining dividends quickly but does provide excellent long-term growth opportunities.

Top holdings:
  • AstraZeneca PLC

  • Shell PLC

  • HSBC Holdings PLC

  • Unilever PLC

  • BP PLC

Xtrackers FTSE 100 UCITS ETF 1C Overview

Looking at mid-2022, the fund has seen outstanding growth. In fact, while it did see a drop in mid-2020, it has recovered evenly and does not show signs of stopping.

Of its top five holdings, AstraZeneca and HSBC Holdings have seen, respectively, 14.9% and 16.4% growth in the last year, with Unilever and BP growing as well. Only Shell saw a 5% drop.

Top holdings:
  • AstraZeneca PLC

  • Shell PLC

  • HSBC Holdings PLC

  • Unilever PLC

  • BP PLC

What Are FTSE 100 ETFs and How Do They Work?

First, we need to explain what an ETF is, then get into detail on the FTSE 100 index in order to explain how these financial concepts work together.

Exchange-Traded Funds (ETFs)

An ETF, or Exchange-Traded Fund, is a type of investment fund. That means it's a pooled financial vehicle that lets multiple investors pool their money together for the purpose of investing in a diversified portfolio of assets.

It is managed by a professional investment manager.

Unlike regular funds, ETFs are traded on the stock exchange throughout the day, like an individual stock.

They are structured so that they track the performance of an underlying index, in order to replicate the index’s performance. This is done by having them hold the same, or similar, portfolio of assets that make up an index.

Pros
  • Diversification - Due to their very nature, ETFs offer exposure to a variety of securities, sectors, and regions.
  • Cost-effectiveness - Compared to other investment options, ETFs tend to have lower expense ratios.
  • Flexibility - ETFs can be traded at any time during the trading day. It lets investors quickly enter and exit any position on the market.
Cons
  • Lack of control - Funds are controlled and directed by investment managers, and investors have little control.
  • Market risk - As with any investment, there is a risk associated with investing in a fund. If the index you invested in goes down, so will your investment. This is especially important if a holding that makes a large chunk of the entire fund goes down in value.
  • Potential for Overtrading - Frequent buying and selling within a fund can lead to an accrual of transaction costs and fees. This is especially important for ETFs, due to their flexibility.

The FTSE 100 index

A stock market index is a statistical measure that represents the performance of a group of securities, derivatives, or other financial instruments. They serve as a kind of reference or benchmark for the assessment of the performance of a particular market, sector, company, or asset class.

The FTSE 100 Index, also known as the Financial Times Stock Exchange 100 Index, is a widely recognised benchmark index of the UK stock market. This index is a reference for the 100 most powerful (in terms of market capitalization) companies by market capitalisation on the London Stock Exchange.

It should be noted that this is a weighted index, meaning that the greater the market value of a company within the index, the greater its impact (both positive and negative) on the entire index.

To sum up, the above eight funds are actually Exchange Traded Funds that track the FTSE 100 index, also called index tracker funds, i.e. the top 100 companies that are traded on the London Stock Exchange.

Pros
  • Broad Market Access to the UK market - This index provides an investor with great exposure to the top 100 companies on the LSE. This means it provides exposure to a variety of sectors and industries.
  • Well Established - The FTSE 100 index is a widely recognized and respected benchmark in the financial industry.
  • Liquidity - It consists of large and frequently traded companies, which allows for ease of buying and selling, enabling investors to enter or exit positions without significant price impact.
Cons
  • Concentration Risk - The FTSE 100 is heavily weighted towards large companies and tracks only a fifth of the number of companies in the S&P 500 (as an example). This lowers its potential diversification level.
  • Lack of Small and Mid-cap Exposure - It is the nature of this index that prevents investors from accessing weaker companies.
  • Low geographic diversification - It only focuses on companies listed on the London Stock Exchange, significantly anchoring the index geographically.

How Much Money Do You Need to Get Started with an FTSE 100 ETF?

There is no right answer to this question, as it greatly depends on the investment platform and the fund you are interested in. That being said, most funds and platforms don't actually have a minimum investment limit. So, there is a good chance you can begin investing with as little as £100.

If you have trouble making a decision on how much to invest, consider the following factors
  • How much money are you willing to put into stake?

  • Do you have any rainy day savings set aside?

  • Be clear on your investment goals (and understand any investment takes time)

Best Platforms to Invest in FTSE 100 ETFs

Now putting all of the above into practice. The below platforms are the best trading platforms you can use to invest in ETFs that track the FTSE 100 index.

1. Interactive Investor - Best overall for FTSE 100 ETFs

Account minimum deposit£0
Trading fee (stock)£5.99 per trade for “Investor” and “Pension Builder” subscriptions; £3.99 per trade for Super Investor
Trading fee (fund)£5.99 per trade for “Investor” and “Pension Builder” subscriptions; £3.99 per trade for Super Investor
Currency Conversion Fees1.5% mark-up for positions under £25k.
Account ChargesMonthly subscriptions vary between £4.99, £9.99, and £19.99 a month
Investment typesBonds, Commodities, Funds, Stocks, Crypto (only through ETFs or stocks)
AppAndroid and iOS

Interactive Investor is a leading broker platform in the UK. With over £55 billion worth of assets, it has established itself as the second-largest investment platform in the UK, just behind Hargreaves Lansdown.

This extensive asset base speaks to its credibility and popularity among investors. Furthermore, it is regulated by the Financial Conduct Authority, ensuring the safety of your funds. With a user-friendly web trading platform, it offers a well-designed interface that is easy to navigate.

One of the platform's strengths lies in its ease of withdrawals and deposits. Additionally, Interactive Investor excels in providing top-tier educational content, helping investors improve their financial knowledge and assisting them in making better decisions.

It's worth noticing that Interactive Investor employs a unique fee structure. Instead of percentage-based fees, it offers three tiers of monthly subscriptions:

  • Investor Essentials plan

  • Investor plan

  • Super Investor plan

This flat fee structure is great for investors with high-value portfolios when we take into account a percentage-based fee structure’s effects on the same.

However, Interactive Investor does have some drawbacks. Its product offering is primarily focused on traditional products, such as UK funds and a somewhat average selection of stocks.

While it provides essential research tools, more sophisticated charting and analytic tools are limited. Additionally, there is a monthly account fee associated with using the platform.

Despite these limitations, Interactive Investor's strong regulatory oversight, user-friendly platform, ease of transactions, and valuable educational content make it a reputable choice for investors seeking a reliable broker platform in the UK market.

2. Hargreaves Lansdown - Best Overall

Account minimum deposit£1
Trading fee (stock)£1.50 per deal
Trading fee (fund)0.45% - 0%
Currency Conversion Fees1.00% - 0.25%;
Investment typesBonds, Funds, Trusts, Forex, Commodities, Stocks, Crypto (only through ETFs or stocks)
AppAndroid and iOS

Hargreaves Lansdown, a well-established UK investment platform, is renowned for its diverse range of investment options, including index funds. It has a comprehensive suite of investment tools and services which are great for both veteran and beginner investors.

Just like Interactive Investor, HL is regulated by the Financial Conduct Authority.

Now, with Hargreaves Lansdown, investors have access to a wide variety of market data, research reports, and investment analysis. The platform itself is user-friendly, with both the website and mobile apps receiving positive reviews.

It is somewhat limited in alerts and two-step login security measures.

Another small issue, however, is the lack of advanced charting and graphing tools that many other platforms offer.

Keep in mind that account charges with Hargreaves Lansdown are percentage-based, which are varying based on the value of your portfolio. While the fees tend to be more favourable for medium and high-value portfolios, they are not so difficult for low-value portfolios either.

Its many services on offer are very viable, but it sadly lacks access to forex, CFDs, and the future. Still, it's an excellent choice for anyone interested in investing in ETFs.

3. Fineco Bank - Best for Experienced Investors

Account minimum deposit£0
Trading fee (stock; For UK customers)For UK Stock: £2.95 per trad, For US Stock: £3.95 per trade, and For German Stock: £3.95
Trading fee (fund; For UK customers)0.25% - 0
Currency Conversion FeesVaries
Account Charges0.25% annually
Investment typesFunds, stocks, ETFs, ETCs and bonds
AppAndroid and iOS

Fineco Bank is an Italian stockbroker and bank that operates under the regulation of the Bank of Italy. However, it has operated in the UK for some time and is regulated by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority.

Where it stands out is with its low stock and ETF fees, along with the absence of inactivity and withdrawal fees. Furthermore, its mobile trading platform provides an excellent user experience.

The platform does have some drawbacks. One frustrating feature is that the only way you can deposit is through a bank transfer. Another, albeit smaller, issue is that the educational materials provided by FinecoBank are not up to the level offered by many of its competitors.

Customer support from FinecoBank is highly-reviewed, with excellent phone and email assistance. However, while it does have live chat, it does not (at the time of writing) offer 24/7 assistance.

This is an excellent choice for more experienced investors, who don't mind using only bank deposits, and who don't necessarily need advanced educational materials.

Fineco Bank8.7Visitfinecobank.com
How Do I know Whether Investment Platforms are safe?

There is always a risk when it comes to any type of investment. However, the above platforms are all safe and regulated.

That being said, there are a couple of things you need to consider when thinking of using a specific platform or broker:

  • Regulation - Are these platforms or brokers licensed and regulated by a relevant authority? For the UK, that means the Financial Conduct Authority.

  • Reputation - Check online and see what the experts say on whether the platform or broker you are interested in has a good track record when it comes to safety and customer service.

FAQs

What is the best FTSE 100 index tracker fund?
Is S&P or FTSE 100 better?
What is the best way to invest in FTSE 100?

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Contributors

Aleksandar Hrubenja
With a BA in English literature and linguistics, training provided by veteran licensed court interpreters, and direct content management experience, Aleksandar Hrubenja knows what good content looks like. He’s tackled any topic thrown his way, spending the last six years writing articles on finance, cryptocurrency, and digital marketing — just to name a few.
Muze Hasan
Muze Hasan is a technical writer with deep experience writing for the Finance industry for topics including but not limited to stocks, cryptocurrency, mergers, acquisitions, valuation, and insurance. He is also a subject matter expert on Blockchain technology and has designed a plethora of web 3.0 whitepapers and pitch decks. On weekends, you can find him riding his Harley Davidson on the Himalayan mountain range.
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