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Best ETF UK – Compare Top ETFs 2021

Although there is an element of excitement about picking and choosing individual stocks – sometimes it’s best to consider an Exchange-Traded Fund (ETF). In doing so, you’ll often be investing in hundreds of different stocks from a variety of markets and sectors. In this guide, we discuss the best ETF UK investments to consider in 2021.

You can diversify with ease and take a backseat approach to investing. On top of the wider stock markets, ETFs can also track other asset classes – such as bonds, commodities, and real estate investment trusts.

Key Points on the Best ETF UK

  • Exchange-traded funds, or ETFs, are baskets of securities that can be bought and sold on exchanges in the same way that stocks are traded.
  • ETF market prices move constantly throughout standard trading hours; unlike mutual funds that are traded once per day after the markets close.
  • Buying ETFs often involves low expense ratios as well as fewer broker fees, making it relatively cheaper than buying stocks outright.
  • Did you know that you can trade ETFs with 0% commission on eToro?

 

68% of retail investor accounts lose money when trading CFDs with this provider.


Best ETF UK 2021 List

Before reading our analysis of each investment in full – check out which our pick for the best ETF UK and nine other ETFs we like the look of.


Best ETFs UK Reviewed

All in all, there are hundreds of ETFs available in the UK market – most of which can be invested in from the comfort of your home.

This covers virtually every market possible – including but not limited to dividend stocks, gold, corporate bonds, US Treasuries, and real estate. As such, there’s a lot of research to perform before you take the financial plunge.

To give you a bit of inspiration, below we discuss the best ETF UK investments in the market right now!

1. SPDR S&P 500 ETF – Overall Best ETF UK

Irrespective of whether you’re a seasoned investor or a complete novice – we would argue that the SPDR S&P 500 ETF is head and shoulders above anything else in the market. As the name suggests, this ETF will track the S&P 500 index. If you’re unfamiliar with this index, it’s the most traded stock benchmark globally. If you want to learn how to invest in the S&P 500 UK, our beginner’s guide has everything you need to know.

In simple terms, the S&P 500 will track the largest 500 stocks listed in the US. This covers both the NYSE and NASDAQ – so you’ll be investing in some of the biggest and most recognized companies. This includes everything from Amazon, Visa, Nike, Apple, Johnson & Johnson, MasterCard, Facebook, Microsoft, and as of recently – Tesla.

spdr s&p 500

Like most stock market indexes, the S&P 500 is weighted based on market capitalization. In other words, larger companies like Amazon and Apple will have a much larger say in the price movement of the index. Crucially, by investing in the SPDR S&P 500 ETF, you are buying a stake in all 500 stocks.

For example, let’s suppose that Facebook has a 2% weighting, while IBM is weighted at 1%. If you invested £5,000 into the SPDR S&P 500 ETF, you would essentially own £100 worth of Facebook stocks and £50 worth of IBM stocks. In turn, if one of the stocks in your ETF pays a dividend, you would be entitled to your share.

This means that you can make money on two fronts. In terms of past performance, the S&P 500 has managed averaged annualized returns of 10% since it was launched almost 100 years ago. Naturally, any ETF investment that you make will follow suit.

68% of retail investor accounts lose money when trading CFDs with this provider.


2. iShares Core FTSE 100 Index ETF – Best ETF UK for Investing in London Stock Exchange 

From an investment perspective, there is a lot to be excited about in the UK economy. Not only is the UK home to one of the fastest vaccine rollouts globally, but the pound sterling is extremely bullish. With that said, there are still plenty of cheap stocks in the market at present – largely because many sectors are still in dire straights as per the wider COVID lockdown.

With this in mind, now could be a great time to invest in the FTSE 100. This is the primary UK equity market index that tracks the 100 largest companies on the London Stock Exchange. The easiest way of backing the FTSE 100 is through an ETF. The most popular option in the market is that of the iShares Core FTSE 100 UCITS.

ftse 100 index

This ETF will look to track the FTSE like-for-like by investing in all 100 companies at the correct weight. This will be rebalanced every three months to ensure the ETF is as closely represented as the index.

To give you an idea of where your money will be allocated, you’ll be indirectly purchasing a 5% holding of Unilever and AstraZeneca stocks, 4% in HSBC, and 3% in Rio Tinto, Diageo, Royal Dutch Shell, GlaxoSmithKline, BP, and British American Tobacco. As is evident, you will be well-diversified across the wider UK economy.

Much like the previously discussed SPDR S&P 500 ETF, iShares will distribute your share of any dividend payments every three months. In terms of past performance, the FTSE 100 is still worth less than pre-pandemic levels. But, this does offer a good opportunity to invest at a discount. The index requires a further 16% to get back to the 7,600 points level – which it last hit in February 2020.

68% of retail investor accounts lose money when trading CFDs with this provider.


3. SDPR Gold ETF – Best ETF to Buy for Investing in Gold 

Moving away from stocks momentarily, next up on our list of the Best ETF UK is that of the SDPR Gold, which is our top recommended best gold ETF. As the name suggests, this ETF will get you direct access to the gold markets without you needing to worry about physical storage. Instead, through a single ETF investment, you can benefit from the rise in global gold prices.

In fact, the SDPR Gold ETF is the world’s largest exchange-traded fund for physically-backed gold. In Layman’s terms, this means that the ETF provider – SDPR, will physically purchase and store gold on behalf of its investors. This means that when the price of gold rises and falls, as will the value of the ETF.

best gold etf uk

As we discussed in our article on how to invest in gold, this store of value has been on a tremendous run for many years now. Over the past five years alone gold has increased in value by over 45%, and by 580% compared to 20 years prior. Plus, gold is a great way to hedge against rising inflation and falling stock markets – which is why the SDPR Gold ETF is so popular.

Perhaps the main drawback with this ETF is that you will not benefit from quarterly dividends. After all, gold is a commodity, and thus – the only way that you can make money is when the asset increases its price. When it does, this will be reflected in your SDPR Gold ETF investment – which you can cash out at any time during standard market hours.

68% of retail investor accounts lose money when trading CFDs with this provider.


4. iShares Core U.S. REIT ETF – Best ETF UK for Investing in Real Estate 

There is often a misunderstanding in the UK and that the only way to invest in the real estate market is to buy a house. This means a mortgage commitment of 35+ years or a significant lump sum investment. The good news is that you can still invest in the real estate market with a small amount in the shape of a REIT ETF.

For those unaware, a real estate investment trust – or simply REIT, will hold a portfolio of properties. This might focus on a specific sector – such as commercial properties, residential units, or retail parks. Either way, as a REIT investor, you will be able to grow your money in the same way as you would when buying a house.

iShares Core U.S. REIT ETF

That is to say, you will be entitled to your share of monthly rentals payments. You will also benefit when the value of the REIT increases – which it will do if the properties it owns appreciate. If this sounds of interest to your long-term investing goals, we like the look of the iShares Core U.S. REIT ETF.

Put simply, by meeting a minimum investment of just $50 (about 40 GBP) at an FCA broker like eToro – you can invest in the wider US real estate sector. In fact, this ETF will get you access to over 151 individual REITs – meaning you are investing in thousands of properties around the US.

This covers virtually every sector imaginable – such as healthcare centers and hospitals, multi-complex family units, individual homes, shopping malls, and office blocks. Best of all, this ETF charges a management fee of just 0.08% per year – so a £10,000 investment would cost you just £8 annually!

68% of retail investor accounts lose money when trading CFDs with this provider.


5. SPDR Dow Jones Industrial Average ETF – Best ETF UK for the Dow Jones Index 

This ETF is the best option on the table for those of you that wish to invest in the Dow Jones index. For those unaware, the Dow Jones is a stock market index that consists of 30 large-scale American companies. These come from a variety of sectors and the index is one of the best ways to gauge the strength of the wider US economy.

dow jones etf etoro

This includes the likes of Microsoft, SalesForce, Visa, Goldman Sachs, Home Depot, and United Health Group. Best of all, the 30 companies on the Dow Jones not only dominate their respective sector – but they all pay dividends. Once again, you can invest in this ETF commission-free at eToro from just $50.

68% of retail investor accounts lose money when trading CFDs with this provider.


6. Vanguard Short-Term Bond ETF – Best ETF to Buy for Hedging Against Uncertain Stock Markets 

The wider stock markets have been in an upward trend since 2009 – meaning that we are now in our longest ‘bull run’ for nearly half a century. As such, many believe that it is only a matter of time before the next market correction comes into play. In Layman’s terms, this means that the stock markets remain in a downward trend for several months or even years.

During uncertain times, it is therefore wise to consider a hedging investment strategy. One of the best ways to do this is to consider the Vanguard Short-Term Bond ETF. This ETF invests in short-term debt – most of which is concentrated on US government bonds with a 1-5 year expiry. Some of the ETF is also made up of high-grade corporate bonds.

Vanguard Short-Term Bond ETF

Nevertheless, the yields on the bonds held by the Vanguard Short-Term Bond ETF are minute – meaning that you will be lucky to outpace inflation. You will, however, be able to put your money into an investment vehicle that is as safe and secure as it comes. Crucially, this isn’t an ETF for the long-term.

Rather, it’s a way to get your investment capital out of the stock markets until it appears that a new bull market is in full swing. When it is, it’s then just a case of taking your money out of the Vanguard Short-Term Bond ETF and once again reinjecting it into the stock market.

Only this time, you won’t be buying your chosen stocks at inflated prices. Instead, you’ll be re-entering the market when many stocks are likely to be undervalued.

68% of retail investor accounts lose money when trading CFDs with this provider.


7. Vanguard Growth Index Fund ETF – Best ETF UK for Growth Stocks 

Growth stocks are highly sought after by investors in the UK that wish to target above-average gains – and are prepared to take slightly more risk to get there. However, you can greatly reduce your exposure to this sector by investing in an ETF that focuses exclusively on the best growth stocks in the market.

At the forefront of this is the Vanguard Growth Index Fund ETF. This ETF will get you access to over 250 individual growth stocks from a variety of sectors. With that said, the ETF is heavily weighted to its top-10 holdings, with a 47% allocation. This includes Apple, Microsoft, Amazon, Google, Facebook, Tesla, Visa, NVIDIA, Home Depot, and MasterCard.

Vanguard Growth ETF

As you might know, many of the aforementioned stocks have performed tremendously well in recent years. In fact, many saw double or even triple-digit gains in 2020 alone. In terms of how this specific ETF has performed, returns over the past five years have been phenomenal.

For example, in the five years prior to writing this article, the Vanguard Growth Index Fund ETF was priced at just $102 per share. Fast forward to earlier 2021 and the same ETF is trading at $256 per share. This translates into five-year returns of over 150%. Best of all – the expense ratio on this top-rated ETF is just 0.04% per year.

68% of retail investor accounts lose money when trading CFDs with this provider.


8. FTSE All-World UCITS ETF – Best ETF UK for a Global Portfolio of Stocks  

While many of the ETFs discussed on this page have focused on UK and US-listed stocks, some of you might be looking to gain exposure to a more global marketplace. If this is the case, it doesn’t get much better than the FTSE All-World UCITS ETF. In a nutshell, this ETF will get you access to over 3,500 individual stocks from a variety of economies.

FTSE All-World UCITS ETF

While companies based in the UK and US are covered, you’ll also be investing in firms located in Japan, China, France, Switzerland, Australia., Canada, Germany, Taiwan, and more. This covers a well-weighted balance of industries – covering everything from energy, materials, and health care to financials, technology, and telecommunications.

68% of retail investor accounts lose money when trading CFDs with this provider.


9. VANGUARD S&P 500 UCITS ETF – Best ETF to gain exposure to the US benchmark index

If you’re searching for a risk-free way to invest in robust stock market gains, while restricting downside risk, then you might want to consider the Vanguard S&P 500 exchange-traded fund (NYSEARCA: VOO). This is a popular ETF that tracks the performance of the top 500 companies in the US.

There are multiple reasons why the Vanguard S&P 500 ETF attracts the attention of new investors. Firstly, it’s made up of the largest market cap stocks. This is a key point because large market cap stocks are typically more resilient to adverse market volatility. Overall, this ETF has more than $100 billion in assets under management. Furthermore, most investors and market analysts will flock to these large-cap companies when there is a market correction.

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If you’re looking to invest in the best Vanguard ETF UK, be sure to also check out our thorough guide where we compare the top ETFs in 2021.

The Vanguard S&P 500 ETF has high levels of liquidity as well as significant daily trading volumes. Another reason why many investors find this fund appealing is that it offers a 30 day SEC yield of 1.23% and has a low expense ratio of just 0.03%.

VOO was launched back in 2010. Since the fund’s inception, it has managed to generate an average annual return of 16.10% according to Vanguard, and it has appreciated by over 250%. This raises the following question: what is responsible for the ETF’s successful and robust performance? The answer is strikingly simple.

Major companies in the tech sector account for 28% of the Vanguard S&P 500 ETF’s assets. Let’s look at the month-end ten largest holdings as of the 31st of August 2021:

  1. Apple Inc
  2. Microsoft Corp. 
  3. Alphabet Inc. 
  4. Amazon.com Inc. 
  5. Facebook Inc. 
  6. Tesla Inc.
  7. NVIDIA Corp. 
  8. Berkshire Hathaway Inc. 
  9. JPMorgan Chase & Co. 
  10. Johnson & Johnson

68% of retail investor accounts lose money when trading CFDs with this provider.


10. iShares Core High Dividend ETF – Best ETF UK for Solid Dividend Stocks  

Risk-averse investors in the UK will often build a diverse portfolio of high-grade dividend stocks. This paves the way for slow and steady capital gains, alongside regular dividend payments. But, why stop at buying just a few dividend stocks when you can invest in over 75 via an ETF?

The iShares Core High Dividend ETF not only focuses on dividend-paying companies – but those that have a long-standing track-record on the stock exchange. This allows you to invest in a more predictable manner – as you’ll be backing the likes of Johnson & Johnson, Procter & Gamble, Exxon Mobile, Chevron, and Cisco.

iShares Core High Dividend ETF

As you may know, some of the aforementioned companies have been paying dividends for many decades. As always, the ETF will collect dividends throughout the month and make a single distribution on a quarterly basis. You also stand the chance of making money when the value of the 75 stocks held by the ETF collectively increases in value.

68% of retail investor accounts lose money when trading CFDs with this provider.


What is an ETF?

Exchange-traded funds have become increasingly popular with expert investors and beginner traders in recent years and for good reason. ETFs have a wide appeal as they offer a cost-effective way to gain exposure to a variety of tradable assets such as stocks, bonds, commodities, and even real estate in the form of real estate investment funds (REITs). 

Buy ETFs on eToro

68% of retail investor accounts lose money when trading CFDs with this provider.

Looking to learn more about ETFs? By the end of this guide, you’ll not only know how to invest in ETFs, but you’ll know how to buy ETFs from the comfort of your own home. 

An ETF, otherwise known as an exchange-traded fund, is similar to a mutual fund. The main difference is that ETFs are traded on stock markets. Put simply, ETFs can be traded like traditional stocks.  

How are ETFs traded?

When looking to buy ETFs you need to bear in mind that these types of funds allow investors to buy a basket of stocks or other assets at once. 

Many beginner traders want to know how to invest in ETFs with the best strategies in 2021. Unlike mutual funds, ETFs are traded on stock exchanges, meaning you can trade them at any time during standard market hours. Other funds are only bought and sold once during standard trading hours. Despite being able to request to trade them at any time throughout the day it won’t actually happen instantly. Your trade will go through at the next available trade point. 

AAXJ ETF on eToro

68% of retail investor accounts lose money when trading CFDs with this provider.

When you sell and buy ETFs you’ll find that there are two prices – the bid price and the ask price. The difference between these two prices is referred to as the market spread. Therefore when learning how to invest in ETFs you need to always consider the spread, as it will likely make up most of your trading fees. 

How are ETFs managed? 

ETFs are typically managed passively and are based on tracking the performance of a specific market index such as the S&P 500 and FTSE 100. All in all, the majority of ETFs are passively managed vehicles that track the performance of underlying indexes. However, roughly 2% of the funds in the $4 billion ETF sector are managed actively, providing many of the benefits of trading mutual funds. Investing in ETFs is an effective way to add active management strategies into your portfolio. But, you’ll need to be aware of higher expense ratios. 

Passive ETFs vs Active ETFs  

Index ETFs and actively managed ETFs share some design qualities, but they use contrasting trading strategies. 

Index ETFs are passive investment vehicles that are designed to track the performance of a major index. Active ETFs, on the other hand, typically attempt to outperform a benchmark index. 

As passive investing strategies, the holdings of an index ETF depend heavily on how the underlying market index performs. Fund managers trade assets to match the index and mimic its performance. 

An active ETF will usually use a market index as a benchmark. Instead of trying to match or copy the performance of market indexes, active ETFs are designed to try and trump its performance. If active ETF fund managers get it right then they could potentially generate high ROIs and profits. Yet, outperforming a market index over the long haul is a difficult thing to achieve. 

Active ETFs React in Real-Time to Economic Events as They Happen

A key advantage of actively managed ETFs is that they can quickly adapt to market volatility and current events. Active ETF fund managers switch up their holdings whenever necessary, meaning they can quickly eliminate companies that are experiencing a drop in their share prices because of current events and market conditions. This flexibility may be more appealing to investors with a lower risk tolerance. 

Index Funds Provide Robust Long-Term Profits 

Over the five years, 75.27% of actively managed ETFs have fallen short of the S&P 500 index, according to spglobal.com. Even during 2020, a year heavily impacted by the coronavirus pandemic and economic uncertainty, 60.33% of funds underperformed the S&P 500.  

On the flip side, not all active ETFs try to outperform benchmark indexes. Some simply seek to generate positive returns, regardless of the prevailing market conditions. 

ETFs vs Mutual Funds vs Stocks

ETFs Mutual Funds Stocks
ETFs are a type of financial security that tracks the performance of a benchmark index, sector, commodity or other asset class.  A mutual fund is a financial vehicle made up of funds from a pool of investors to buy and sell assets such as stocks, bonds.  Stocks are an investment in a company. When investors buy stocks, they become shareholders and therefore own a percentage share of the company. 
ETFs are traded on stock markets during standard trading hours just like stocks. Unlike stocks and ETFs, mutual funds can only be traded once per day, after market closure at 16:00 ET.  You can trade shares in three different markets. The pre-market, the regular market, and after-hours market trades. 
Several ETFs can be traded with 0% commission and are typically cheaper than mutual funds as they do not charge marketing fees.  Some mutual funds do not incur load fees, but the majority are more expensive than ETFs as they charge marketing and administration fees.  Depending on your chosen broker, stocks can be traded on a commission-free basis. Some stock brokers like eToro even offer fractional share trading, allowing you to invest in a portion of an entire stock. 
When buying and selling ETFs you do not take ownership of the underlying assets.  Mutual funds own the securities in the basket.  When you invest in actual stocks you gain ownership of the asset and become a shareholder, with some stocks even paying regular dividend payouts. Stock CFDs, on the other hand, are leveraged and speculative CFD derivatives and you can either go long or short on your investment. 
ETFs offer great portfolio diversification by tracking the performance of various securities in a single fund.  Mutual funds can diversify risk because they build a portfolio that covers different asset classes and financial instruments.  When you buy and sell stocks, the risk involved depends entirely on their market movements and performance over time. 
When a fund experiences a net outflow of money, investments need to be sold to raise funding. In-kind redemptions are a basic feature of ETFs.  Mutual funds can be redeemed for cash at their net asset value. Stocks can be traded using fiat currencies. 
ETFs are often more cost-effective when compared to other tradable instruments. There are also some tax preferences to holding ETFs because of the way the redemptions are handled, giving investors some relief from capital gains exposure.  Mutual funds invested in government bonds are also referred to as tax-free funds because they yield tax-free interest.  Stocks are taxed according to standard income tax rates or at capital gains rates. 

68% of retail investor accounts lose money when trading CFDs with this provider.

How to Choose the Best ETFs to Invest in

We have discussed 10 of the best ETF UK investments to consider in 2021. However, there are thousands of ETFs that you can invest in from the UK – meaning that you are best advised to do your own homework.

There are several key metrics that you can look at in finding an ETF that is right for your financial goals – which we elaborate on in more detail below.

Asset Class

First and foremost, take a step back and think about the type of assets you wish to gain exposure to. In the 10 ETFs that we discussed earlier, we covered a variety of investment classes.

This was to illustrate just how diverse the ETF space is. For example, if you’re looking to invest in a specific stock market tracker fund like the FTSE 100, FTSE 250, Dow Jones, S&P 500, or the NASDAQ Composite – there are plenty of ETF providers to choose from. This covers the likes of Vanguard ETFs, iShares, Invesco, BlackRock, SDPR, and many others.

best etfs uk

Or, you might consider a specific niche of the equity arena – such as growth stocks, dividend stocks, or small cap stocks. Outside of the stocks and shares space, there are also ETFs that can track commodities like gold, silver ETFs, lithium ETFs and oil – as well as both corporate and government bonds.

Potential Returns

Once you have an idea of what asset classes take your fancy, you then need to think about your long-term targets. For example, if you’re looking to chase above-average market returns, then you will be more suited for ETFs that track growth stocks, high-yielding corporate bonds, or volatility equity markets.

Or, if you’re looking to take a more modest approach to risk and rewards, then you might want to concentrate on ETFs that invest in safe asset classes. This might be a REIT ETF that tracks US and UK properties or an ETF that focuses on US Treasuries. The way to gauge your potential returns is to look at the past performance of the ETF in question – perhaps over the last 10-20 years.

Risk

Put simply, the higher the financial returns you seek from an ETF investment, the more risk you should be prepared to take. This is the classic risk vs reward conundrum.

The amount of risk that you are taking is ultimately down to the types of financial instruments and markets that your chosen ETF looks to track. For example, an ETF that tracks growth stocks is going to be more condusive for this than one that invests in US Treasuries. However, the risks of investing in growth stocks are also much higher.

Crucially, although ETFs allow you to invest in a diversified basket of assets – there is still every chance that you will make a financial loss. As such, make sure you have a firm understanding of how much risk you are taking.

Economies

It’s also a good idea to think about which economies and markets you want to invest in. For example, if you feel bullish about the wider UK economy, you’d be best suited for an ETF that tracks the FTSE 100. If it’s the US market that interests you, then an ETF that tracks the S&P 500 would be ideal.

With that said, if you’ve got a slightly higher appetite for risk, it’s also possible to invest in the emerging markets. For example, the FTSE All-World UCITS ETF gives you access to some of the fastest-growing global economies of the past decade. This includes everything from South Africa, Brazil, and India to China, Thailand, and Taiwan.

Crucially, attempting to invest in these diverse marketplaces on a DIY basis is very challenging as a retail investor. This is why ETFs are the best option on the table – as you can invest in hundreds of emerging stocks through a single trade!

Income or Growth

It is also important to understand how you plan on making money from an ETF investment. For example, all ETFs are listed on a public stock exchange – meaning that their value will go up and down throughout the day. This is will go in your favor should the NAV (Net Asset Value) of the ETF rise.

In other words, if the value of the assets held by the ETF collectively performs well, so will the stock price of the ETF in question. If it does, you’ll make capital gains when you eventually get around to cashing out. With that said, some ETFs are also great for earning regular income.

This includes ETFs that track REITs, dividend-stocks, and bonds. In most cases, your dividend payment will be distributed every three months. However, some ETFs – such as those that track commodities like gold and oil – will not yield any income. Instead, you’ll only make money if the underlying asset increases in value.

Types of ETFs

Here’s a list of the most popular ETFs in which to invest in the UK market:


Best ETF UK Investment Platforms 2021

So now that we have explained what you need to look out for to choose an ETF that meets your financial goals – we now need to talk about trading platforms. That is to say, in order to invest in an ETF – you first need to find a suitable brokerage site. Your choice of broker should not only focus on whether or not it offers your chosen ETFs, but what fees and commissions it charges.

To help point you in the right direction – below we discuss the best UK ETF brokers to invest in ETFs.

1. eToro – Top Broker to Buy the Best ETFs with 0% Commission

etoro logo

eToro is now one of the most popular brokerage sites in the UK – with a global client base that now exceeds 20 million traders. Not only does eToro allow you to trade stocks, cryptocurrencies, forex, and commodities – but heaps of ETFs, too.

In fact, all of the best ETFs to buy that we have discussed today can be bought at the click of a button at eToro. In doing so, you will not pay a single penny in dealing fees.

ETORO REVIEW

Furthermore, you only need to meet a $50 minimum investment on each ETF – which is significantly less than going direct with the provider. This allows you to invest in a basket of different ETFs without needing a large capital outlay.  We also like eToro as it offers a range of passive trading tools that you combine with a classic ETF investment.

For example, this stock broker offers dozens of CopyPortfolios from a variety of strategies and objectives. This includes a portfolio that targets the best renewable energy stocks and one that tracks digital currencies like Bitcoin and Ethereum. As a crypto-specific ETF is yet to hit the UK retail client market, this is a great substitute.

ETORO REVIEW

In terms of getting started with an active funds investment at eToro, opening an account takes minutes.  You can easily deposit funds with a UK debit/credit card, Paypal, or Skrill – all of which are processed instantly. If you want to do a bank transfer, this is also supported – but might take slightly longer. Finally, eToro is authorized and regulated by the Financial Conduct Authority, and your trading capital is protected by the FSCS. This makes it one of the best FCA brokers across the board.

Pros:

  • Super user-friendly online trading platform
  • Buy stocks without paying any commission or share dealing charges
  • Trade CFDs in the form of stocks, indices, commodities, forex, and more
  • 2,400+ stocks listed on the UK and international markets
  • 150+ ETFs
  • Deposit funds with a debit/credit card, e-wallet, or UK bank account
  • Ability to copy the trades of other users
  • FCA and FSCS protections

Cons:

  • Not suitable for advanced traders that like to perform technical analysis

68% of retail investor accounts lose money when trading CFDs with this provider.

2. Fineco Bank – Affordable Share Dealing Platform

Fineco logo

Although eToro is the best UK broker to invest in ETFs in terms of user-friendliness, safety, and fees – Fineco Bank stands out for the sheer size of its asset library. For example, while eToro is capped to 250+ of the best ETFs to buy, Fineco offers thousands of markets.

Not only does this include ETFs listed in the UK, but dozens of international exchanges, too. For example, you can invest in ETFs from the US, Singapore, Japan, and much of Europe. When it comes to fees, this stock broker offers one free ETF per month.

ETFS FINECO BANK

You do, however, need to choose an ETF from a selected list of 200-ish. If your chosen investment isn’t on this list, then you will pay $/£3.95 for ETFs listed in the US and Europe, respectively. Other regions will vary depending on the exchange. We also like the auto investment feature offered by Fineco.

This allows you to invest a fixed amount (minimum £50) into your chosen ETF each and every month. When you invest in this way, you will pay one flat fee of £2.95 per month. In terms of safety, Fineco Bank is authorized and regulated by the FCA and you are also protected by the FSCS.

Pros

  • Charges just £2.95 per trade when buying and selling UK shares
  • £3.95 on US-listed stocks
  • Access to thousands of UK and international shares
  • Deposit funds with a UK bank account
  • Heavily regulated, including an FCA license
  • Suitable for both newbies and seasoned investors
  • Great research and educational department
  • Established way back in 1999
  • All personal data protected

Cons

  • 0.25% annual fee

65.69% of retail investor accounts lose money due to CFD trading with this provider.

How to Buy the Best ETFs UK

To conclude our guide on the Best ETFs for 2021 – we are going to walk you through the process of making your first investment.

The steps below are based on FCA broker eToro – which allows you to invest in the best ETFs UK commission-free and from a minimum stake of just $50.

Step 1: Open an Account and Upload ID

Visit the eToro website and open an account. This will require some personal information and contact details – and should take you no more than 5 minutes to complete.

eToro sign up

You’ll also need to verify your mobile number and email address.

To ensure eToro complies with the FCA, you will also be asked to upload a copy of your passport or driver’s license. If you are not planning to invest more than $2,250 right now (about £1,700) and you don’t have the documents to hand – you can upload them at a later date.

Step 2: Make a Deposit

Now it’s time to make a deposit into your eToro account.

You can choose from the following payment methods:

  • Debit Card
  • Credit Card
  • E-Wallets (Paypal, Skrill, Neteller)
  • Bank Transfer

Step 3: Search for ETF

If you know which ETF you wish to buy right now – search for it. If not, click on the ‘Trade Markets’ button, followed by ETF.

Step 4: Invest in an ETF

Once you click on the ‘Trade’ button next to the ETF that you wish to invest in, an order box will appear. All you need to do is enter your stake (minimum $50) in USD.

Finally, click on the ‘Open Trade’ button to complete your commission-free ETF investment!

Step 5: Dividends and Cashing Out

As soon as you have invested in an ETF at eToro, you can keep track of its current market value by clicking on the ‘Portfolio’ button. This will tell you how much your investment is worth in real-time.

buy etf at etoro

You can exit your ETF investment any time during standard market hours.

When you do, the cash will instantly be reflected in your eToro account. Until that time comes, you will be entitled to your share of dividends – as and when the ETF provider makes a distribution.

Pros and Cons of ETF Investing

  • ETFs have roughly $2 trillion of assets with 70% of that coming in the last few decades.
  • Great way to diversify your portfolio as they are entities that own stocks, commodities, and other such securities.
  • Provides the diversity and flexibility of owning multiple stocks, bonds, or other assets in a single fund.
  • You can trade ETFs throughout the trading day in the same way you would stocks.
  • Low costs – most ETFs are passively managed like index funds.
  • ETFs offer exposure to different markets at low costs.
  • For traders with large taxable accounts there are some tax benefits when holding ETFs.
  • The way the redemptions are handled gives traders some relief from capital gains exposure.
  • When you trade ETFs you do not take ownership of the underlying securities.
  • You can go long or short on an ETF based on your speculations.
  • Gain potential profits from ETFs that invest in dividend stocks. 
  • Some ETF brokers like eToro charge 0% commission to open and close ETF positions.
  • The total expense ratios, or ongoing charges, are set up by the fund company and ETF provider. These total expense ratios are typically very low. For example, the total expense ratio on the SPDR S&P 500 ETF is roughly 0.05%.
  • You can choose between an actively managed fund and a passively managed ETF depending on your risk tolerance and experience levels.  

  • Most investors who choose ETFs are not interested in beating the markets but are willing to take whatever it will give them. 
  • You’ll be signing up to 100% of the downside risk of that index.
  • Tracking errors – ETF managers are burdened with the task of maintaining the fund’s balance so that it performs like the indexes they track. This is easier said than done, and when ETFs stray from their intended index this can lead to losses. 
  • No guarantee that when you buy ETFs they will increase in value.

Veridct

In summary, this guide has discussed the top 10 best ETFs for 2021. We covered a wide variety of markets – from the FTSE 100, S&P 500, and gold, to growth shares, oil, and dividend stocks. Ultimately, no-two ETFs are the same, so it’s imperative that you do your homework.

If you’re ready to start your ETF investing journey right now, eToro is a great broker to consider. The FCA-regulated broker offers heaps of the best ETFs to invest in – all of which can be traded commission-free. Best of all, the minimum investment is just $50 per ETF – so you can easily diversify with a small amount of capital.

68% of retail investor accounts lose money when trading CFDs with this provider.

Frequently asked questions on ETFs

What is an ETF?

What is the best UK ETF for the FTSE 100?

What is the best ETF fund UK for gold?

What is the best Best ETF fund UK for US stocks?

What is the best ETF to buy now?

Where can you buy ETFs in the UK?

How do you make money from an ETF?

Are ETFs a good way to invest?

Are ETFs safer than stocks?

Are ETFs best for beginners?

How are ETFs taxed?

About Kane Pepi PRO INVESTOR

Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Academically, Kane holds a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and he is currently engaged in a Doctorate Degree researching the money laundering threats of the blockchain economy. Kane is also behind peer-reviewed publications - which includes an in-depth study into the relationship between money laundering and UK bookmakers. You will also find Kane’s material at websites such as MoneyCheck, the Motley Fool, InsideBitcoins, Blockonomi, Learnbonds, and the Malta Association of Compliance Officers.

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