Although there is an element of excitement about picking and choosing individual stocks – sometimes it’s best to consider an 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.
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.
- SPDR S&P 500 ETF – Overall Best ETF UK – Invest Now
- iShares Core FTSE 100 UCITS ETF – Best ETF UK for Investing in LSE – Invest Now
- SDPR Gold ETF – Best ETF to Buy for Investing in Gold – Invest Now
- iShares Core U.S. REIT ETF – Best ETF UK for Investing in Real Estate
- SPDR Dow Jones Industrial Average ETF – Best ETF UK for the Dow Jones Index
- Vanguard Short-Term Bond ETF – Best ETF to Buy for Hedging Against Uncertain Stock Markets
- Vanguard Growth Index Fund ETF – Best ETF UK for Growth Stocks
- FTSE All-World UCITS ETF – Best ETF UK for a Global Portfolio of Stocks
- United States Oil Fund ETF – Best ETF to Buy for Investing in the Price of Oil
- iShares Core High Dividend ETF – Best ETF UK for Solid Dividend Stocks
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.
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.
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.
Your capital is at risk.
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.
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.
Your capital is at risk.
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.
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.
Your capital is at risk.
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.
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!
Your capital is at risk.
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.
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.
Your capital is at risk.
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.
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.
Your capital is at risk.
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.
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.
Your capital is at risk.
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.
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.
Your capital is at risk.
9. United States Oil Fund ETF – Best ETF to Buy for Investing in the Price of Oil
If you’re looking for an alternative asset class that is currently in a great run of form – why not consider oil? There is no requirement for you to worry about storing or transporting large barrels to gain access to this marketplace. On the contrary, you can indirectly invest in oil via an ETF.
The best option in this respect is the United States Oil Fund ETF – which attempts to track the West Texas Intermediate (WTI) benchmark. For those unaware, this is the main oil benchmark in the US. Put simply, if the global price of oil increases, the United States Oil Fund ETF should follow suit.
As you may know, the value of oil hit rock-bottom prices in early 2020, when the coronavirus pandemic first came to fruition. But, over the course of the past 11-ish months, oil has been on an upward trajectory. This is fully evident in the price of the United States Oil Fund ETF.
For example, you would have paid $17 in late April 2020. At the time of writing in March 2021, the same ETF is trading above the $40-mark. This means that in just under one-year, the United States Oil Fund ETF has returned gains of over 135%. If this ETF takes your fancy – you can enter and exit your position at any time during standard market hours.
Your capital is at risk.
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.
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.
Your capital is at risk.
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.
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.
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.
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.
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.
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:
- Gold ETFs
- Silver ETFs
- Vanguard ETFs
- iShares ETFs
- Oil ETFs
- UK Bond ETFs
- Lithium ETFs
- Technology ETFs
- SPDR ETFs
- High Yield ETFs
- S&P 500 ETFs
- Platinum ETFs
- Commodity ETFs
- MSCI World Index ETFs
- VIX ETFs
- ARK ETFs
- Russia ETFs
- REIT ETFs
- FTSE 100 ETFs
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 ETFs.
1. eToro – Top Broker to Buy the Best ETFs with 0% Commission
eToro is now one of the most popular brokerage sites in the UK – with a global client base that now exceeds 17 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.
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.
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.
- 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
- Not suitable for advanced traders that like to perform technical analysis
67% of retail investors lose money trading CFDs at this site
2. Fineco Bank – Affordable Share Dealing Platform
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.
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.
Your money is at risk.
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.
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-Wallet (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.
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.
eToro – Buy the Best ETFs UK at 0% Commission
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.
67% of retail investor accounts lose money when trading CFDs with this provider.