Passive investing – last minute tracker ISA ideas
Adam Laird, passive investment manager at Hargreaves Lansdown, looks at tracker funds that different investors can use as their last minute ISA choice.
“It is just as important for passive investors to use their ISA allowance as it is for active investors,” says Laird (pictured). “The ISA allowance is GBP11,880 but it is lost forever unless it is used before midnight on 5 April.”
Passive income investor
Legal & General UK 100 Index Trust: The UK’s largest listed companies are an excellent source of income - the FTSE 100 currently yields over 3.5 per cent. The FTSE 100 contains the largest, most frequently traded shares on the London Stock Exchange and includes many of the UK’s best known household names like Vodafone, HSBC and GlaxoSmithKline.
Legal & General UK 100 Index Trust tracks the FTSE 100 index. It is the lowest cost fund available to UK investors with an annual management charge of 0.06 per cent and ongoing charge of 0.09 per cent. The fund currently yields 3.5 per cent.
Legal & General All Stocks Gilt Index Trust: Gilts have long been used by investors who want to take a more defensive approach. Historically gilts have been less risky than stock market investments and the return is usually lower. Gilts are not risk free and the fall in yields in recent years could be reversed in the future, possibly resulting in investors losing money if they sell their investment. Tracker funds are popular with gilt investors as it is important to minimise charges.
Legal and General’s gilt tracker covers over 40 UK government bonds. Their team is one of the most experienced in gilts and manage the fund conservatively for a 0.1 per cent ongoing charge. The fund currently yields 2.4 per cent.
Medium risk investor
BlackRock Consensus 85: BlackRock's Consensus 85 is a whole portfolio in one fund, and gives access to a range of international markets in one investment. It invests in shares, bonds, property and cash. BlackRock invest passively, looking to track the markets they are invested in, rather than beat them. The fund is restricted to a maximum 85 per cent in shares, though generally holds less than this.
The fund is useful because it offers access to a whole balanced portfolio in one trade. It has an annual management charge of 0.20 per cent and ongoing charge of 0.23 per cent. Through Hargreaves Lansdown investors pay 0.13 per cent as they receive a Loyalty Bonus of 0.10 per cent.
Legal & General International Index Trust: It’s important for passive investors to look outside the UK, and include international companies in their portfolio. These include some of the best performing markets recently, including the US and Japan.
I would suggest the Legal & General International Index Trust is one of the most straightforward ways to invest globally. It tracks the FTSE World (ex UK) Index and invests in over 2000 companies worldwide. It has an annual management charge of 0.14 per cent and ongoing charge of 0.20 per cent.
Cash: It is important you use your ISA allowance because if you don’t use it, you lose it. Investors who have not decided where to invest can still open up a stocks and shares ISA, holding the money temporarily in cash before making their choice.
Junior ISA investor
BlackRock Emerging Markets Equity Tracker: Emerging market funds invest in companies in the world’s fastest growing economies. These companies are riskier, but with greater potential for longer term gains. Tracker funds are one of the easiest ways to gain exposure to this diverse area in one go and at a low cost.
The BlackRock Emerging Markets Equity Tracker invests in the FTSE All-World Emerging Index. This is one of the most inclusive emerging market indices covering over 700 stocks. It has an annual management charge of 0.18 per cent and ongoing charge of 0.25 per cent.
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