Low-cost index funds for simple investing

Index funds, also known as tracker funds or passive funds, offer all sorts of benefits to investors.

While actively-managed funds can often incur high management fees for the supposed expertise of the fund manager, index funds are a low-cost alternative that offer investors convenient access to a sector or geography.

Some of the top funds that investors choose are, unsurprisingly, index funds – especially as passive funds often outperform their active counterparts.

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“There is a high rate of underperformance for active investing strategies so there is a persuasive school of thought that investors should just aim to maximise returns by minimising costs with inexpensive index funds,” Rob Morgan, chief investment analyst at online investing platform Charles Stanley Direct, told MoneyWeek.

“They represent a particularly good strategy for areas where portfolio managers consistently struggle to beat the market index – often large, well-researched markets. The US market is a prime example, and investors will have done well in recent years simply to buy an S&P 500 tracker,” Morgan added.

Index funds can typically offer low costs (as well as low transaction fees due to low turnover).

Here, we’ll explore some of the tracker funds available to UK investors that carry the lowest ongoing fees, as potential low-cost additions to your portfolio.

What are index funds?

An index fund replicates the performance of a major index, like the FTSE 100 in the UK or the S&P 500 in the US.

“They do this by simply buying the same (or at least very similar) mix of investments as the index they track,” said Morgan.

“Rather than trying to beat the market, index funds simply aim to replicate it,” said Chris Beauchamp, chief market analyst at online investing platform IG. “They hold the same securities as the index they track, in the same proportions, so when the index rises, so does the fund, and vice versa.”

Low costs and more: what are the advantages of index funds?

The active versus passive investing debate is age-old. In theory, a skilled active manager will pick and choose stocks that will outperform the broader market benchmark (usually an index that a tracker fund will follow).

In reality, however, beating the market is difficult and the majority of active funds not only fail to do so but also significantly underperform. That, coupled with the fact the fees on active funds are almost always higher, means they can be an inadvisable way to invest in the stock market.

“Low costs are the headline advantage [of index funds], as annual charges are typically well below 0.5%, compared to 1%+ for actively managed funds,” said Beauchamp. “Over time, that difference compounds significantly.”

AJ Bell’s latest Manager versus Machine report, released in December 2025, showed that less than a quarter (24%) of active funds outperformed a passive alternative over the 10 years to 30 November 2025 – the lowest that metric has been since AJ Bell started running the report.

“There’s no dressing it up, it’s quite simply been a dreadful decade for active fund managers,” said Laith Khalaf, head of investment analysis at AJ Bell.

^{Source: AJ Bell and Morningstar, total return in GBP to 30 November 2025.}

Index funds aren’t just lower-cost alternatives to active funds, but they have also generated higher returns in recent years.

They are also “simple to understand, easy to buy, and inherently diversified, owning a slice of every company in an index rather than betting on individual stocks”, adds Beauchamp.

What are the disadvantages of index funds?

One of the obvious drawbacks of index funds is that, while they won’t underperform it, they won’t outperform the index they are tracking. Actively managed funds, by contrast, have the potential to beat their benchmark.

They also potentially expose investors to concentration risk, given that market cap-weighted indices become concentrated in the largest stocks.

“It is worth noting that the huge rise in the share prices of a cluster of large tech and e-commerce businesses has overwhelmingly driven the US market over the past decade,” said Morgan.

“Given the now-concentrated nature of these indices, should these stocks have a tougher time, a standard US or global index fund could struggle. You could say that investing in the US market passively has rarely been as concentrated, and therefore as risky, as it is today, and the more diverse approach of an active fund could help temper this.

12 low-cost tracker index funds to consider

Here, we’ve picked out a (non-exhaustive) selection of some low-cost index funds and exchange-traded funds (ETFs) that highlight the different kinds of exposure index funds can offer.

This information does not reflect all the fees and charges (as well as discounts) that might apply through different brokers.

^{*To 26 February 2026, via Fefundinfo}

Beauchamp highlighted VWRL, calling this “a genuine one-stop-shop for diversification” given the broad exposure across developed and emerging markets it offers by tracking the FTSE All-World Index.

^{*To 26 February 2026, via Fefundinfo}

^{*To 26 February 2026, via Fefundinfo}

^{*To 26 February 2026, via Fefundinfo}