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Best ETFs UK to Watch

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Although there is an element of excitement about picking and choosing individual stocks – sometimes some traders 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 ETF UK investments to research in 2022.

By investing into an ETF, you can diversify your portfolio and take a backseat approach to investing. As well as the wider stock markets, ETFs can also track other asset classes – such as bonds, commodities, and real estate investment trusts.

Key Points on ETFs

  • 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.

Popular ETF UK 2022 List

Before reading our analysis of each investment in full – check out 10 popular ETFs UK based on trading volumes:

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All in all, there are hundreds of ETFs available in the UK market that can be bought through online trading platforms.

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.

1. SPDR S&P 500 ETF 

As the name suggests, the SPDR S&P 500 ETF tracks 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.

In simple terms, the S&P 500 will track the largest 500 stocks listed in the US. This covers both the NYSE and NASDAQ including 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. By investing in the SPDR S&P 500 ETF, you are buying a stake in all 500 stocks that the index tracks.

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.

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2. iShares Core FTSE 100 Index ETF 

The FTSE 100 is the primary UK equity market index that tracks the 100 largest companies on the London Stock Exchange. The iShares Core FTSE 100 UCITS ETF is one way of investing into these companies.

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.

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. The index requires a further 16% to get back to the 7,600 points level – which it last hit in February 2020.

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3. SDPR Gold ETF 

Moving away from stocks momentarily, next up on our list is the SDPR Gold.

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.

best gold etf uk

Over the past five years alone gold has increased in value by over 45%, and by 580% compared to 20 years prior.

This ETF does not pay quarterly dividends. This is because gold is a commodity so money is made when the asset price increases. This will be reflected in your SDPR Gold ETF investment.

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4. iShares Core U.S. REIT ETF 

The REIT ETF provides exposure to the real estate market.

A REIT (real estate investment trust), 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, investors are entitled to a share of monthly rentals payments. Investors also benefit when the value of the REIT increases – which it will do if the properties it owns appreciate.

The iShares Core U.S. REIT ETF covers a variety of sectors such as healthcare centers and hospitals, multi-complex family units, individual homes, shopping malls, and office blocks.

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5. SPDR Dow Jones Industrial Average ETF 

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 gauges the strength of the wider US economy.

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This includes the likes of Microsoft, SalesForce, Visa, Goldman Sachs, Home Depot, and United Health Group. The 30 companies on the Dow Jones all pay dividends.

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6. Vanguard Short-Term Bond ETF 

The Vanguard Short-Term Bond 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

The yields on the bonds held by the Vanguard Short-Term Bond ETF are small. However, the fund is fairly stable and offers security. This ETF is mainly purchased by long-term investors. Investing into the ETF is a way of investing out of the stock markets.

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7. Vanguard Growth Index Fund ETF 

Growth stocks target above-average gains and come with a higher risk than other investments.

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

Vanguard Growth ETF

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8. FTSE All-World UCITS ETF 

The FTSE All-World UCITS ETF offers exposure to the global marketplace. 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

The ETF covers companies based in the UK and US as well as firms located in Japan, China, France, Switzerland, Australia., Canada, Germany, Taiwan, and more. The ETF covers balance of industries including energy, materials, and health care to financials, technology, and telecommunications.

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9. VANGUARD S&P 500 UCITS ETF

The Vanguard S&P 500 ETF is an ETF that tracks the performance of the 500 companies in the US.

The ETF is made up of the largest market cap stocks in the US. Overall, this ETF has more than $100 billion in assets under management.

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If you’re looking to research the  Vanguard ETF UK, be sure to also check out our thorough guide where we compare popular ETFs that are available in 2022.

The Vanguard S&P 500 ETF has high levels of liquidity as well as significant daily trading volumes. The ETF also offers a 30 day SEC yield of 1.23% and has an expense ratio of 0.03%.

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10. iShares Core High Dividend ETF 

Risk-averse investors investors seek to build a diverse portfolio of dividend stocks to achieve slow growth and regular dividend payments.

iShares Core High Dividend ETF

The ETF will collect dividends throughout the month and make a single distribution on a quarterly basis. The value of your portfolio will reflect the value of the 75 companies tracked by the ETF.

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What is an ETF?

Exchange-traded funds are a type of digital asset that offer 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). 

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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?

ETFs 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 different strategies in 2022. ETFs are traded on stock exchanges, meaning you can trade them at any time during standard market 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. 

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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.

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 one 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. 

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

Actively managed ETFs can adapt to market volatility and current events. Active ETF fund managers switch up their holdings whenever necessary, meaning they can eliminate companies that are experiencing a drop in their share prices because of current events and market conditions.

Important Features of ETFs

We have discussed some ETF UK investments to research in 2022. However, there are thousands of ETFs that you can invest in from the UK – meaning that you are 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

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, do you want to chase above-average returns or build a secure portfolio for the long-term?

Risk

In general, 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.

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 common practice to think about which economies and markets you want to invest in. Different economies will be exposed to different global events which will mean that each economy will perform differently.

A slightly higher appetite for risk allows you to invest in the emerging markets. For example, the FTSE All-World UCITS ETF gives you access to a range of global economies. 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. ETFs make it possible for retail investors to diversify their investments with just one fund.

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.

Our ETF Guides

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


ETF UK Investment Platforms 2022

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.

1. eToro

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eToro has a global client base that now exceeds 20 million traders. Not only does eToro allow you to trade stocks, cryptocurrencies, forex, and commodities – but ETFs, too.

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The platform offers a $10 minimum investment on each ETF. This allows you to invest in a basket of different ETFs without needing a large capital outlay.

The stock broker also offers CopyPortfolios from a variety of strategies and objectives. This includes a portfolio that targets the 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.

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You can open an eToro account in minutes. You can deposit funds with a UK debit/credit card, Paypal, or Skrill. 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 FCA brokers across the board.

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2. Fineco Bank 

Fineco logo

Fineco Bank has a varied asset library and offers thousands of assets.

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.

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Conclusion

In summary, 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.

Frequently asked questions on ETFs

What is an ETF?

Are ETFs safer than stocks?

How are ETFs taxed?

Kane Pepi author check sign 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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