Best Index Funds For UK Investors – US, UK, Emerging Markets & More

You have probably heard that investing in Index funds is one of the easiest and most passive ways to invest in the stock market. However, there is hundreds of Index funds out there and it can be hard to know which ones to invest in.

You may have read some books or watched Youtube videos that talk about index funds in the USA but when you go to find them in the UK they aren’t there. This is due to regulatory reasons. In this article, I’m going to show you what I think are some of the best Index funds in the UK right now for a few different markets.

DISCLAIMER: Please remember that when you invest, your capital is at risk. We are NOT authorised by the regulators to give you financial advice (or to carry out any regulated financial activity), so we kindly ask that you not take the information on our website, mobile apps, online community or social media pages as financial advice. The information available on our platforms serves as general financial guidance material to give you an idea of what is available on the market. If you feel like you need personalised financial advice you should seek the help of a qualified financial advisor.

Best Index Funds For UK Investors

Index funds are a type of mutual fund or ETF that track a financial market index such as the S&P 500 or FTSE 100. As these funds simply track an index, they are much cheaper than actively managed funds.

An Index fund provides you with broad market exposure without having to invest in a wide range of individual companies which can be expensive and hard to manage.

For most people, Index Funds are considered the ideal core holding in your portfolio. Over a 10-year period, less than 7% of active fund managers beat the market. Knowing this makes Index Funds even more attractive for regular investors. If someone who trades stocks all day for a living can’t beat the market, how can we expect to?

Even legendary investor Warren Buffet stated that Index Funds are a safe haven for savings in the later years of life. Rather than picking individual stocks, he said it makes more sense for the average investor to buy all of the S&P 500 companies at the low cost that index fund offers.

Now, when it comes to finding an Index Fund to invest in, things get a little more complex. There are hundreds out there from different companies, that track different indexes. In the table below I have picked out 10 of my favorite Index Funds for UK investors based on their exposure to markets, price and size of the fund. Further down we take a look at each fund in more detail.

We have chosen a range of high-quality, popular Index funds available to UK investors. The funds are in 5 different categories US, UK, Europe, Emerging Markets & Global Funds.

Performance data is based on past five-year performance as of 24/10/23 when this table was produced.

Best US Index Funds For UK Investors

The US Stock market has produced some of the best returns over the past 50 years. Many people simply invest in the S&P 500 and don’t invest in anything outside of that. If you believe in the future growth of the United States then one of these Index Funds could be a great choice for you.

Other investors will use a combination of US Index funds and other market Index funds to diversify their portfolios.

Here are some of the best US Index funds for UK investors. These will give you exposure to the US market with High-Quality Funds and low fees.

UBS S&P 500 Index

The UBS S&P 500 Index fund aims to track the return of the S&P 500 Index before the deduction of charges. The fund employs a passive investment strategy, investing all, or substantially all, of its assets in the shares of companies that make up the Index.

The S&P 500 Index is made up of 500 of the largest publicly traded companies in the United States. This is one of the most widely followed equity indexes in the world and is considered a key indicator of the overall health and performance of the US Stock Market.

Over the past 50 years, the S&P 500 has returned an average of approximately 10% per year outperforming most fund managers. This is why it is such a popular addition to many investors’ portfolios. If you believe in the growth of the United States, the S&P 500 is a great choice of Index Fund.

It is made up of 100% US companies however many of these companies also trade internationally.

The top holdings in the Index are Apple (7.56%), Microsoft Corp (6.51%), Amazon (3.11%), Nvidia (3.01%), Alphabet Class A (2.06%), Tesla (1.87%), Meta (1.83%), Alphabet Class C (1.77%), Berkshire Hathaway (1.63%) and UnitedHealth Group (1.23%).

This fund has a reasonable expense ratio of 0.09% per year. While this isn’t as cheap as some of the United States based funds it is fairly low for a fund available in the UK.

If you are looking to invest in some of the largest companies in the world and believe that the United States will have a prosperous future then the UBS S&P 500 fund could be an option for you.

The fund has returned a cumulative 79.93% in the past 5 years to 23/20/2023.

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

Vanguard US Equity Index Fund (Accumulation)

While the the UBS S&P 500 fund tracks the S&P 500 Index, the Vanguard US Equity Index aims to track the S&Ps Total Market Index. It holds almost all of the investable US Stock market with over 3600 holdings.

If you are looking to invest in large-cap companies as well as mid and small-cap companies in the United States then this is a great option to get diversified exposure to the American market.

The fund is made up of 98% US Equities with a small percentage allocated to other assets.

The top holdings consist of Apple (6.45%), Microsoft (5.55%), Amazon (2.65%), Nvidia (2.57%), Alphabet (1.75%), Tesla (1.6%), Meta (1.57%), Alphabet Class C (1.51%), Berkshire Hathaway (1.39%) and UnitedHealth Group (1.05%).

It has an ongoing charge of 0.1% which is reasonable compared to other competitor funds in the market.

Over the past 5 years to 24/10/23 the fund has returned a cumulative 74.81% which is pretty impressive.

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

Best UK Index Funds

If you live in the UK it makes sense that you may want to invest in the UK market. While the UK has lagged in returns to the US over the past 20 or so years it may still be a market you want to include in your portfolio.

Here are some of the best UK Index Funds you can invest in:

Vanguard FTSE 100 Index Accumulation

The Vanguard FTSE 100 Index aims to track the performance of the FTSE 100 Index. The FTSE 100 is an index of the 100 largest companies listed on the London Stock Exchange.

The fund has one of the lowest expense ratios on this list coming in at only 0.06%. Fees are usually lower when you are investing in a fund that invests in your own country as there are a lot fewer dealing fees involved such as FX charges.

The chart above shows the accumulation version of this fund where dividends are automatically re-invested. If you did not re-invest dividends the returns would be much lower.

The fund is invested in approximately 92.65% UK Equities, 5.06% International Equities, 0.87% in Property and the remaining in other categories.

The top holdings in the fund consist of AstraZeneca (8.32%), Shell (8.15%), HSBC Holdings (6.50%), Unilever (5.29%), BP (4.2%), Diageo (3.78%), Glencore (2.97%), British American Tobacco (2.93%), Rio Tinto (2.82%) and GSK (2.8%).

You may notice the lack of tech holdings in this list. Only 0.77% of the FTSE 100 is invested in technology. Most major tech companies are based in the United States which is why you don’t see them in the FTSE. This is one of the biggest contributors to the lower returns in the UK vs the US over the past 2 decades.

Over the past 5 years to 24/10/23 this fund has a cumulative return of 27.81%.

If you’re looking for exposure to the largest companies in the UK, this Index fund is a great option.

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

FTSE 250 UCITS ETF (VMIG)

The Vanguard FTSE 250 UCITS ETF aims to track the performance of the FTSE 250 index in the UK. The index is made up of mid-sized company stocks.

The fund has a fairly low expense ratio charging 0.10% annually.

Over the past 5 years to 24/10/23 this it has performed relatively poorly, down a cumulative 10.38%.

However, this is not an accumulation fund and pays a dividend. The current dividend yield of the holdings is 3.31% as of 24/10/2023. If these were re-invested you would see significantly better returns over the past 5 years. There is an accumulation fund now also available but it hasn’t been around for 5 years. Over the past 3 years, it has returned 2.9% to 24/10/23.

The top holdings of the fund consist of Diploma (1.31%), Dechra Pharmaceuticals (1.27%), Marks & Spencers Group (1.25%), Intermediate Capital Group (1.21%), Howden Joinery Group (1.2%), Games Workshop Group (1.18%), Spectris (1.13%), Greencoat UK Wind Plc (1.05%), HIKMA Pharmaceuticals (1.04%) and British Land Co (0.97%).

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

Best Global Index Funds For UK Investors

Global Index funds allow you to get exposure outside of the US & UK. These funds invest in top companies from all around the world. You will generally have a heavy weighting towards the US & UK with a portion of the portfolio being dedicated to other developed markets around the world.

Global funds in the past have returned slightly less than investing solely in the US market however it does provide less volatility with the extra diversification.

Let’s take a look at some of the best Global Index Funds available in the UK:

Fidelity Index World Fund P

The Fidelity Index World Fund aims to achieve long-term capital growth by matching the performance of the MSCI World Index, a broad global equity index. The fund invests in 1,510 companies across 23 different developed countries.

The fund has a very reasonable expense ratio of 0.12% annually. This is fairly low for a fund that invests in the global market.

Approximately 72.7% of the fund is invested in North America, 4.1% in the UK, 13.64% in developed Europe, 6.21% in Japan with the remaining allocation in other markets. While this is a global Index fund, most of your allocation is still highly weighted towards the US market.

The top holdings in this fund include Apple (4.8%), Microsoft (3.96%), Amazon (2.08%), Nvidia (1.9%), Alphabet Class A (1.41%), Alphabet Class C (1.26%), Tesla (1.26%), Meta (1.2%), Exxon (0.86%) and UnitedHealth Group (0.85%).

Over the past 5 years to 24/10/23, this fund has returned a cumulative 59.67%.

If you want a one-fund portfolio to invest in I think this is a great choice. Rather than Investing in an S&P 500 index tracker, A UK Tracker and a European Markets tracker, you can invest in this fund and get exposure to all of them with one fund.

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

Vanguard Lifestrategy 100% Equity Fund

The Vanguard Lifestrategy 100% Equity is another global Index fund. Rather than holding individual stocks from an Index, this fund holds 10 different Index funds targeting different regions of the global market.

As the name suggests, it is designed to be a complete Lifestrategy fund. It gives you global diversification while targeting growth.

It has a slightly higher expense ratio of 0.22% annually. This is higher than some of the other funds on this list however the one fund approach could make it worthwhile to simply your investments.

Approximately 32% of the fund is invested in North America, 27% in Developed Europe excluding UK, 22% in the UK, 5% in Emerging Asia, 5% in Japan and the rest in other markets across the world.

As you can see this fund has much less exposure to the US market than the Fidelity World Index above and has a wider diversification across the globe.

Over the past 5 years to 24/10/23 this fund has returned a cumulative 47.84%.

This fund makes for a great 1 fund portfolio for UK investors. It diversifies itself well across the globe investing in large and mid-cap stocks. As you get closer to pension age, you may want to look at the Vanguard Lifestrategy 80%, 60% or 40% Equity funds. These funds hold a lower percentage in equities and the remaining percentage in bonds, helping to preserve your capital as you approach retirement.

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

Best Emerging Markets Index Fund For UK Investors

Emerging market index funds refer to funds that invest the majority of their assets in securities from countries with economies that are considered to be emerging. These funds generally offer high potential returns but also much higher potential risk.

Let’s take a look at a few available in the UK:

Fidelity Emerging Markets Index

This Fidelity Emerging Markets Index aims to achieve long-term capital growth by closely matching the performance of the MSCI Emerging Markets Index. This index is made up of 1,437 companies from 24 emerging market countries.

If you’re looking to invest in emerging markets this fund is a great way to do it in a cost-effective way. The ongoing management charge is 0.20% annually.

The fund is made up of approximately 65% Emerging Asia, 10% Middle East and Africa, 8% Developed Asia, 7.5% South and Central America and the remaining to other emerging markets.

Over the past 5 years to 24/10/23 this fund has returned a cumulative 13.18%.

If you believe emerging markets are going to grow in the future, adding this fund as a small portion of your overall portfolio can help to diversify your holdings.

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

Best European Market Index Fund

Many people will invest in European Index funds that exclude the UK. This allows you to get exposure to the European market without overlapping your existing UK investments.

Legal & General European Index (Accumulation)

The Legal and General European Index aims to track the performance of the FTSE World Europe ex UK Index. The ongoing fund charge is 0.12% annually.

The fund consists of 561 holdings in developed Europe excluding the UK.

Approximately 94% of the fund is invested in Developed Europe excluding UK and the remaining is invested in Emerging Europe, Non-classified and property.

Over the past 5 years to 24/10/23, this fund has a cumulative return of 12.93%.

If you believe in the growth of developed Europe over the long term, this could be a potential Index Fund to add to your portfolio.

Want to purchase this fund? You can purchase it on Hargreaves Lansdown. We may earn a commission if you use our link below. Capital at risk.

Where Can You Purchase Index Funds

You can either purchase an index fund through the company that offers the fund or through a brokerage. Purchasing through a brokerage is usually the easier option. Most popular UK brokerages will offer the Index Funds above.

Our two favorite platforms to purchase Index Funds on are Hargreaves Lansdown and Invest Engine.

Final Thoughts

You should now have a broad overview of the best Index Funds available to investors in the UK right now. We have tried to offer the highest quality funds with low fees on this list. Hopefully, you found an Index fund here that covers the markets you’re looking to invest in.

Remember this article is just to give you an overview of what is on the market. If you think you need personal financial advice, you should speak to a qualified financial advisor.

Read More From Money Sprout:

• Beginners Guide To Investing In The UK
• VTI Equivalent In The UK
• VOO Equivalent In The UK