If you're looking to invest in the UK market, index funds can offer a reliable and cost-effective way to participate in its growth. These funds try to replicate the performance of a specific market index. In doing so, they provide their investors with exposure to a diversified portfolio of stocks and bonds.
In the article below, we will go into detail on what are the best-performing index funds in the UK right now. We will also talk about the platforms that are best for trading.
Best UK Index Funds at a Glance
Below you can find a comprehensive list of index funds you can invest in, in the UK.
Fund Size | Ongoing charge | Net Asset Value | 5-year performance | |
|---|---|---|---|---|
UBS S&P 500 Index Fund C Accumulation | £824.04m | 0.09% | £1.47 | 11.82% |
iShares Emerging Markets Equity Index Fund (UK) D Inc | £3.31bn | 0.21% | £0.98 | +4.73% (only 3 years) |
Vanguard FTSE Global All Cap Index Fund GBP Acc | £2.35bn | 0.23% | £174.12 | +7.67% |
Fidelity Index World Fund A Acc | £4.91bn | 0.30% | £3.32 | +9.18% |
OMR HSBC FTSE 250 Index Life Capital (Series 01) Life Fund | £2.64m | 3.98% | £1.19 | -3.63% |
LV= Fidelity Index Europe ex UK Series 2 Pension Fund | £6.80m | 0.12% | £2.07 | +7.02% |
Vanguard Global Bond Index Fund Institutional Plus USD Hedged Distr | £16.21bn | 0.10% | £88.27 | +2.11% |
Legal & General Global Real Estate Dividend Index Fund L Class Distribution | £1.16bn | 0.06% | £0.57 | +1.98% |
Legal & General US Index Trust R Class Dist | £6.27bn | 0.48% | £6.64 | +11.26% |
Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc | £12.25bn | 0.06% | £243.22 | +3.03% |
1. UBS S&P 500 Index Fund C Accumulation Overview
Like any other S&P fund, this one tracks the 500 leading US companies on the market. This means that investors can expect their investment to mirror the returns of the 500 largest publicly traded companies in the United States. This, in turn, leads to broader market exposure.
There are no stock lending activities on the stocks within this specific fund. Furthermore, the fund focuses on reinvesting any dividends right into the fund, instead of distributing them to investors. This ensures promising growth and increased value for this specific fund.
The fund is managed by UBS Asset Management, a team with over 30 years of experience, and 24-hour global coverage.
Its top five holdings are:
Apple Inc
Microsoft Corp
Amazon Inc
Alphabet Inc
Berkshire Hathaway Inc
2. iShares Emerging Markets Equity Index Fund (UK) D Inc Overview
This fund is, as its name depicts, focused on emerging market equities. Its exciting feature is that it lets investors invest in companies that operate in developing economies around the world. With time, this can lead to substantial growth.
Furthermore, through this investment in developing countries, it offers a unique approach to diversification, by spreading it around multiple countries.
The fund is managed by BlackRock Fund Managers Ltd, one of the largest and most reputable asset management companies.
Its top five holdings are:
Taiwan Semiconductor Manufacturing Co Ltd
Tencent Holdings Ltd
BlackRock Institutional Cash Series US Dollar Liquidity Agency Inc
Alibaba Group Holding Ltd
Reliance Industries Ltd
3. Vanguard FTSE Global All Cap Index Fund GBP Acc Overview
This is an easily accessible fund that offers a high degree of diversification. Through this fund, investors have access to companies of all market capitalisations across developed and emerging markets. It includes large-cap, mid-cap, and small-cap stocks, providing broader exposure to the global equity market.
With an accumulation approach, it reinvests any dividends in order to grow your investments over time.
It is managed by Vanguard Equity Index Group, known for its approach to low-cost investing.
Its top five holdings are:
Apple Inc
Microsoft Corp
Future on E-mini S&P 500 Futures
Alphabet Inc
Berkshire Hathaway Inc
4. Fidelity Index World Fund A Acc Overview
This fund tracks the MSCI world index, which follows large and mid-cap equity performance across 23 developed markets. Its stock comes from major economies, such as Germany, Japan, and the UK.
It has shown fantastic growth in the last five years. At the same time, it has relatively lower expense ratios.
With its focus on the MSCI, this index fund is suitable for investors seeking broad-based international equity exposure.
The fund is managed by Geode Capital. This company is known for its usage of advanced mathematical models and algorithms within their investment decision.
Its top five holdings are:
Apple Inc
Microsoft Corp
E-mini S&P 500 Future
Amazon Inc
Fidelity Institutional Liquidity Fund - USD A Accumulating
5. OMR HSBC FTSE 250 Index Life Capital (Series 01) Life Fund Overview
The FTSE 250 tracks the strongest companies on the London Stock Exchange, starting from the 101 positions to 350. With a focus on mid-cap companies, it's a relatively accessible fund.
Furthermore, its life fund structure means it is often part of an insurance or pension product and is excellent for investors aiming for the long term.
While the fund has seen a drop in performance, it seems to be slowly recovering.
It is managed by HSBC Index and Systematic Equity Portfolio Management Team.
Its top five holdings are:
Dechra Pharmaceuticals PLC
IMI PLC
ICF FTSE 250 Index FU
Spectris PLC
Greencoat UK Wind PLC
6. LV= Fidelity Index Europe ex UK Series 2 Pension Fund Overview
This fund is focused on the performance of European equities, excluding those found in the UK. It tracks stock from companies from various European countries, such as France, Spain, and Switzerland.
The majority of its stock is evenly distributed among healthcare, industrials, financial services, consumer defensive, and consumer cyclical sectors. However, it also has some stock in technology, utilities, and communication services.
The fund has seen very strong and continual growth in the last 5 years.
It is managed by Geode Capital.
Its top five holdings are:
Nestle SA
Novo Nordisk A/S
LVMH Moet Hennessy Louis Vuitton SE
ASML Holding NV
Novartis AG
7. Vanguard Global Bond Index Fund Institutional Plus USD Hedged Dist Overview
The index covers a vast universe of fixed-income securities. It focuses on government bonds, corporate bonds, mortgage-backed securities, and asset-backed securities. The fund represents investment-grade bonds issued by entities from both developed and emerging markets. This leads to a broad representation of the global fixed-income market.
It follows a float-adjusted methodology, which means that the securities within it are weighed and adjusted on the basis of their market value and the amount of their publicly available and tradable bonds.
This is an excellent fund for anybody who wants to park their investments on bonds - i.e. a slow, but steady and secure investment strategy.
It is managed by the Vanguard Equity Index Group.
Its top five holdings are:
United States Treasury Notes 4.25%
Germany (Federal Republic Of)
Germany (Federal Republic Of)
Germany (Federal Republic Of)
United States Treasury Notes 0.375%
8. Legal & General Global Real Estate Dividend Index Fund L Class Distribution Overview
This fund tracks the FTSE EPRA/NAREIT Global Dividend+ Index. It measures the performance of real estate companies and investment trusts.
It includes commercial properties, residential properties, as well as specialised real estate sectors like healthcare and infrastructure. With this index, investors have access to the global real estate market
It is managed by the LGIM Index Fund Management Team.
Its top five holdings are:
Prologis Inc
Public Storage
Realty Income Corp
Simon Property Group Inc
Welltower Inc
9. Legal & General US Index Trust R Dist Class Overview
Legal & General US Index Trust follows the FTSE USA Index. It provides investors with a comprehensive view of the US equity market and serves as a reference point for assessing the performance of US-focused investment strategies.
It tracks a very broad range of markets and companies, with a focus on Technology. Indeed, its holdings represent the most powerful tech companies in the US.
Managed by the LGIM Index Fund Management Team, a team with an average of 15 years of experience per member.
Its top five holdings are:
Apple Inc
Microsoft Corp
Amazon Inc
NVIDIA Corp
Alphabet Inc
10. Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc Overview
Tracking the FTSE All-Share Index, it's a free-float market-capitalisation index that represents the performance of all companies listed on the London Stock Exchange’s main market.
It simplifies investing a bit since its free-float nature means it excludes locked-in shares and only calculates those shares that are readily available on the market.
Individuals investing in this fund have direct participation in the growth of the UK stock market as it covers large, mid-cap, and small-cap companies, across a variety of sectors and industries.
It is managed by Vanguard Equity Index Group.
Its top five holdings are:
AstraZeneca PLC
Shell PLC
HSBC Holdings PLC
Unilever PLC
BP PLC
What Are Index Funds and How Do They Work?
Index funds are investment vehicles that aim to replicate the performance of a specific market index, such as the FTSE 100 or FTSE All-Share. These funds pool money from multiple investors and use it to buy a diversified portfolio of stocks or other securities that mirror the composition of the chosen index. The goal is to closely track the index's returns over time.
They represent a passive investment strategy that is supposed to match the performance of an index they track. Unlike ETFs, you buy an index fund in accordance with how they are priced at the end of the day, while an ETF's prices change in real-time.
Risks and Benefits of Investing in Index Funds
Index funds are an excellent approach to investing. However, as with any other investment strategy, there are certain risks and benefits.
- Market exposure - Index funds are inherently diversified, thus, providing exposure to a broader market, reducing risk and increasing potential gain.
- (Relatively) lower costs - Compared to other funds, index funds have relatively low expense ratios.
- Accessibility - They provide a simple and straightforward way to invest, whether you are a novice or a veteran investor.
- Potential long-term growth - Index funds can capture the overall market’s growth, which can immensely benefit the investor.
- Lack of flexibility - Index funds are bound by the composition of the index they track, which means they can't avoid the overvalued stock or take on a stock that is overperforming.
- Inclusion of underperforming securities - Since index funds include many different securities, there is always a chance that one might severely underperform and drag the entire fund with it.
- Limited outperformance - These funds are made to match the performance of the index they track and they very rarely outperform the market.
There is no right answer to this question. It completely depends on the investor’s financial situation and risk tolerance.
Moreover, it also depends on how you plan to invest in a UK index fund. Some funds, as well as brokers and platforms, may insist on a minimum investment, however, some do not. It is entirely possible to begin investing in index funds with just £100.
Best Platforms for Investing in Index Funds in the UK
In order to maximise your investment results, you first need to have a clear idea of what index funds are, and how they work. However, the next step is having a robust approach to investing.
Below we have listed three high-quality platforms you can use to invest in index funds.
1. Hargreaves Lansdown - Best Overall
Account minimum deposit | £1 |
|---|---|
Account charges | 0.45% on the first £250,000 fund value 0.25% on the value between £250,000 - £1m0.1% on the value between £1m - £2m No charge on value over £2m |
Share Sale Fee | £1.50 per deal |
Investment types | Bonds, Funds, Trusts, Forex, Commodities, Stocks, Crypto (only through ETFs or stocks) |
Hargreaves Lansdown is a well-established investment platform in the UK. It's known for its wide range of investment options, including index funds. HL offers a comprehensive suite of investment tools and services to cater to different investor needs at competitive rates and fees.
The firm is authorised and regulated by the Financial Conduct Authority and takes data protection and security very seriously.
It provides a provision of market data, research reports, and investment analysis which becomes easy for investors to make wise investment decisions.
The platform itself is very easy to use, and both the website and its apps are user-friendly. Both the iOS and Android apps are well-reviewed, with a 4.7 score on the former, and a 4.1 on the latter.
Its account charges are user-friendly as they differ based on the value of your portfolio. While they do lean slightly in favour of medium and high-value portfolios, low-value accounts can still manage to pay the fees.
- You can get expert help on various issues including setting investment goals, planning your investments, and rebalancing your portfolio.
- There's a good selection of ready-made portfolios to choose from.
- The maintanence fees for ISA and SIPP accounts are capped at reasonable amounts.
- The trading and non-trading fees are quite high. The pricing for expert help can also be fairly steep for some investors.
- The platform is not very intuitive and can be quite hard to navigate.
- While the market research is far-reaching, analysis tools have some room for improvement.
2. Interactive Investor - Best for Higher-Value Portfolios
Account minimum deposit | £0 |
|---|---|
Account charges | Monthly subscriptions vary between £4.99, £9.99, and £19.99 a month. |
Funds Sale Fee | £5.99 |
Share Sale Fee | £5.99 |
Investment types | Bonds, Commodities, Funds, Stocks, Crypto (only through ETFs or stocks) |
Interactive Investor is a popular investment platform in the UK that offers a wide range of investment options. It aims to provide investors with comprehensive tools and resources to manage their investments effectively.
Just like Hargreaves Lansdown, Interactive Investor is regulated by the FCA, which ensures compliance with all regulations. With over £55 billion worth of assets, it has become the second largest investment platform in the UK, just behind Hargreaves Lansdown.
The platform offers a range of different plans, like the Pension Builder plan that can help you make your golden years as comfortable as possible.
We do need to point out that fees are a bit different than most platforms. It offers three tiers of monthly subscriptions to its users (Investor Essentials plan, Investor plan, and Super Investor plan), which a user can decide to choose as per their pocket.
Since the platform only has flat fees and obligatory subscriptions, instead of a percentage fee, it can be very beneficial for investors with high-value portfolios.
Its Android app has a poor rating of 2.4 due to innumerable bugs and poor implementation. However, the iOS app has an excellent 4.4 out of 5 rating.
- You can trade fractional shares instead of buying a whole share.
- There are flat-fee charges for ISA and SIPP accounts, so you can grow your investments without worrying about charges increasing.
- The regular investment program comes with no additional charges.
- All accounts charge subscription fees, even the standard trading account sets you back £4.99 per month.
- Unless you opt for the regular investment account, the commissions for trading shares are fairly steep.
- While the educational resources are extensive, the market research is very limited.
3. AJ Bell - Best for Beginners and Low-Value Portfolios
Account minimum deposit | £1,000 |
|---|---|
Account charges | 0.25% of the investment value in your account, divided by twelve, every month |
Funds Sale Fee | £1.50 per deal |
Share Sale Fee | £9.95 per deal (£4.95 where there were 10 or more online share deals in the previous month) |
Investment types | Stock, ETF, Fund, Bonds |
With AJ Bell, investors can choose over 19,000 investments, ranging from funds, shares, ETFs, and trusts. In addition to this, it also offers a great selection of ready-made portfolios.
The firm has excellent customer support, and a host of interactive guides to deepen your financial knowledge.
It's important to note that AJ Bell, like the other platforms on our list, is regulated by the Financial Conduct Authority, which means your money is in safe hands.
In contrast with Interactive Investor, AJ Bell is actually more useful for portfolios with lower values, since it charges a percentage fee on your investments, no matter how low or high they are.
The iOS app of the platform is better than the one found on Google Play, with the former having a 4.8 out of 5 rating, and the latter having 3.2 out of 5.
- Percentage-based platform fee, making it suitable for low-value investors.
- The fund portfolio is far reaching.
- The market research resources are excellent.
- Platform fee can be steep for high-value investors.
- There are hefty trading fees for funds compared to its competitors.
- The currenty exchange fees can be high.
| Name | Score | Visit | Support | Mobile | Security | Commission | Disclaimer | |
|---|---|---|---|---|---|---|---|---|
 | 7.9 | Visitajbell.co.uk | Phone, Live Chat, Email | Android, iOS | 2FA, Biometrics |
There is always a risk when it comes to any type of investing and trading because these forms of investments do not provide any guarantees. That being said, the reputable platforms we noted above have a good track record and are regulated and fully licensed. Every investor needs to be mindful of the possible risk associated with investing and practice due diligence when it comes to researching the right platform for them.
