Are you looking for an investment with the potential for stock market based returns without paying huge fees? If so, an investment trust index tracker may be the ideal solution.
Index tracker investment trusts let you benefit from the potential of the stock market without having to pay specialist fund managers.
Investment trusts work in a similar way to stock market companies. You invest by buying shares in the investment trust and your money is then used to buy shares in other companies.
The top UK investment trusts give you instant exposure to a broad portfolio of investments.
An investment trust index tracker aims to track the performance of a particular share index. So, a FTSE 100 investment trust or a FTSE 250 investment trust will aim to replicate the performance of that particular share index as a whole.
Tracker investment trusts do this by owning all the stocks within the index in the same proportions or by owning a representative sample of stocks.
Index tracker investments versus managed funds
When you put cash into an investment trust you generally have one of two main choices:
- A managed fund
- An investment trust index tracker
Managed investment trust funds employ specialist, professional fund managers to proactively manage your investment. They use their industry knowledge to buy and sell shares within the fund in order to maximise the investment returns.
Index linked investments work differently. They are designed to track a specific share index and to replicate the performance of a share index such as the Dow Jones or FTSE 100 as a whole.
While managed funds can often offer better investment returns, the charges on these investments tend to be much higher than on index tracker investments.
What to look for in the best index linked investments
If you want to find the top UK investment trusts on a tracker basis, it’s vital that you compare the fees and charges.
Different index tracker investments charge different initial and annual management fees and the higher the fee, the more cash is deducted from your investment in charges.
It’s also worth shopping around before you invest in a investment trust index tracker as the commissions you pay can differ from broker to broker.
The best investment trust is likely to be the one that balances low fees with a good yield and investment strategies you favour.
