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Best Passive Funds UK – Invest with Zero Fees

Passive funds like ETFs are one of the cheapest ways to own a diversified portfolio of stocks or other assets. Most fund managers fail to beat their benchmarks, while passive funds simply track their benchmark for a much lower fee.

If you choose the right investment platform you won’t pay commission when you invest in these funds either. In this article, we share some of the best passive funds UK you can use to build a diversified investment portfolio.

Best Passive Funds UK List

Below are our best passive funds UK that give you exposure to a range of asset classes, sectors, and industries. If you are a long-term investor, you can use these passive funds to build a core portfolio.

  1. iShares Core FTSE 100 UCITS ETF – Best UK Large Cap Fund – Invest Now
  2. iShares UK Property UCITS ETF – Best UK Passive funds for property– Invest Now
  3. SPDR S&P 500 ETF – Best US Large Cap Fund – Invest Now
  4. Invesco Nasdaq 100 ETF – Top US Growth Stock Passive Fund
  5. iShares Core MSCI World UCITS ETF – Best Global Fund
  6. Global X Cloud Computing ETF – Best Cloud Computing Passive Fund UK
  7. iShares MSCI Emerging Markets ETF – Popular Emerging Market Passive Fund
  8. Global X SuperDividend ETF – Best Passive Income Fund
  9. GraniteShares Gold Trust – Best Passive Gold Fund
  10. Vanguard Total Bond Market Index Fund ETF – Best Bond Fund

Best Passive Fund to Invest in Reviewed

If you’re wondering how to invest £500 or maybe more, it’s always best to look at various options. There are many passive funds out there and we review our top ten in detail below.

1. iShares Core FTSE 100 UCITS ETF (ISF.L)

This fund tracks the FTSE 100 index, which is the benchmark UK stock market index. The fund invests in the largest 100 companies listed on the London Stock Exchange. The biggest companies in a market tend to be the most stable, if not the fastest-growing.

If you invest in an ETF tracking the FTSE 100 you will automatically be invested in blue-chip stocks like BP, which is a top 10 holding in the fund. Other notable holdings include Unilever, AstraZeneca, HSBC, and Diageo. Although these companies are based in the UK, most of them operate across the globe and are exposed to the global economy.

Best Passive Fund UK FTSE100

67% of retail investor accounts lose money when trading CFDs with this provider. 

2. iShares UK Property UCITS ETF (IUKP.L)

The iShares UK Property ETF is one of the best UK Passive funds for real estate investing. The fund invests in UK-listed real estate companies and Real Estate Investment Trusts.

Property funds are amongst the best income-generating passive investments around. Listed real estate companies generate revenue by developing and managing properties, and then earning rent from tenants. Profits that are not reinvested are passed on to shareholders as dividends, and then on to holders of the UK REIT ETF.

The largest three holdings are Segro REIT, Land Securities Group, and British Land REIT. The fund pays a dividend of around 1.82% of its NAV.

FTSE property fund UK

67% of retail investor accounts lose money when trading CFDs with this provider. 

3. SPDR S&P 500 ETF (SPY)

The first and largest ETF in the world tracks the S&P500 index. This is the most widely followed benchmark index in the world. The ETF invests in the largest 500 listed companies in the US and currently holds assets worth $349 billion.

Any fund that tracks the S&P500 index will give you exposure to the major companies in the US, most of which operate around the globe.

The largest holding is the fund’s allocation to Apple’s stock, at 6%. The top five holdings also include Microsoft, Amazon, Facebook, and Alphabet. However, the fund is not entirely focused on technology companies. The consumer cyclical, financial, industrial, and healthcare sectors are well represented too.

S&P500 Best Passive investment funds uk

67% of retail investor accounts lose money when trading CFDs with this provider. 

4. Invesco Nasdaq 100 ETF (QQQ)

The QQQ fund tracks the Nasdaq 100 Index. The fund is popular with growth investors due to its exposure to US-listed technology companies. Over the last decade, most of the top-performing growth stocks have been in the tech sector. The index has returned a massive 552% over the last 10 years.

If you want to invest in shares of Amazon.com, and other large technology companies like Apple, Microsoft, and Tesla, this fund would be a good choice.

Best Passive Funds UK QQQ ETF

67% of retail investor accounts lose money when trading CFDs with this provider. 

5. iShares Core MSCI World UCITS ETF (SWDA.L)

If you would like to passively invest in all the largest companies in the world, this is the fund to choose. The fund tracks the MSCI World index which includes 85% of the listed companies in 23 developed countries. In total there are more than 1,500 companies in the index.

This fund also conforms to the European UCITS regulations making it is suitable for long-term investors.

Best Passive Funds UK tracking the MSCI world index

67% of retail investor accounts lose money when trading CFDs with this provider. 

6. Global X Cloud Computing ETF (CLOU)

Cloud computing is reshaping the world economy and as such is one of the major growth industries.  This ETF is one of the best ways to invest in the rapidly growing cloud computing sector. The fund invests in 36 pure-play cloud companies. That means it only invests in companies that are completely focused on cloud computing, rather than those that are partially exposed to the cloud.

As an example, Google’s parent company, Alphabet is not included in the fund, because Google operates in other industries, even though it is a major cloud provider. Instead, the fund invests in companies like Dropbox, Proofpoint, and Zscaler that are 100% cloud plays.

Global X Cloud Computing ETF

67% of retail investor accounts lose money when trading CFDs with this provider. 

7. iShares MSCI Emerging Markets ETF (EEM)

This fund is the most popular fund for investing in emerging markets. Emerging economies like China and India have rapidly growing consumer markets, as a result of which they can sustain high levels of GDP growth. While emerging markets funds carry more risk, they typically outperform over longer periods of time.

The fund tracks the MSCI emerging market index. China and Hong Kong account for around 40% of the holdings. Other countries with significant allocations are Taiwan, South Korea, and India. In total there are around 1,300 companies in the index, and 237 countries are represented. Amongst the biggest individual holdings are China’s eCommerce giant Alibaba, Taiwan Semiconductor, Tencent, and Samsung.

Best UK Passive funds for emerging markets

67% of retail investor accounts lose money when trading CFDs with this provider. 

8. Global X SuperDividend ETF (DIV)

If you are looking for a passive investment to generate income, the Global X SuperDividend fund is one to consider. The fund tracks the Solactive Global SuperDividend Index which includes 100 high-yielding stocks.

The index composition is designed to select very profitable companies that can afford to pay generous dividends. Most of the holdings are relatively small businesses that operate in niches around the world. The fund yields around 6.3% of assets, making it one of the Best UK Passive funds to generate income.

Best Passive investment funds UK for income

67% of retail investor accounts lose money when trading CFDs with this provider. 

9. GraniteShares Gold Trust (BAR)

Passive funds are a great, low-cost means of owning precious metals like gold. There are several ways for a passive fund to hold gold. The GraniteShares Gold Trust holds physical gold.

Gold has proven to be an effective hedge against inflation and market volatility over time. By holding a gold ETF alongside other investments, you can reduce the volatility of the overall portfolio.

UK Gold ETF

67% of retail investor accounts lose money when trading CFDs with this provider. 

10.Vanguard Total Bond Market Index Fund ETF (BND)

This Vanguard bond fund tracks a broad index of USD-denominated bonds. The fund is spread across US government bonds, mortgage bonds, and corporate bonds.

Bond funds are another way to reduce portfolio volatility within a broader portfolio of investments. Since the objective of passive investments is to ‘set it and forget it’ it helps to have a few funds that reduce volatility and reduce the temptation to overreact when market volatility increases.

Best Vanguard UK bond fund

67% of retail investor accounts lose money when trading CFDs with this provider. 

What are Passive Funds?

Passive funds are funds that replicate the performance of an index of securities. An index is a basket of securities that are typically weighted by market capitalization. Indexes can include any type of tradable security or a mix of different securities.

Broad market indexes track the performance of the largest companies in a given market. These indexes are used as benchmarks for the performance of the overall stock market. Indexes can also be constructed to reflect the performance of a region, sector, industry, or investment theme.

An index is just a calculation, so you can’t actually invest in an index itself. This is where passive funds like tracker funds come in. A passive fund simply replicates the index by holding the same securities as the index in the same proportion. When the index is occasionally rebalanced, the fund is rebalanced too.

Active vs Passive Funds

While passive funds simply replicate and track an index, active funds are managed by fund managers who attempt to outperform the index. The fund manager decides which securities to hold, and when to buy and hold them. Active funds cost more than passive funds to own but may outperform their benchmark index.

ETFs vs mutual funds?

If you want to invest in a passive fund, you have two options regarding the investment vehicle itself: exchange-traded funds or mutual funds. Strictly speaking, any passive fund is an index fund because it replicates an index. In practice, mutual funds that track indexes are often known as index funds.

An exchange-traded fund (ETF) is a listed trust that holds listed securities but is traded on a stock exchange like a share. ETFs can be traded in a normal trading account throughout the trading day. Exchange-traded funds charge very low annual management fees.

A mutual fund is a slightly different type of fund. When you invest in a mutual fund you transact directly with the fund management company, and new units in the fund are created for you. Mutual funds typically charge higher management fees, but there is no commission charged when you invest. Most mutual funds are actively managed, but there are also lots of passively managed mutual funds.

Why Invest in Passive Funds?

The primary advantage of passive funds is the low cost. Active funds charge higher fees, which add up over time. While active funds do offer the chance of higher returns, the reality is that most active funds underperform their benchmark. This means investors are often better off investing in index trackers that merely track an index with a lower fee.

The other advantage of passive investing index funds is diversification. The best UK Passive funds typically hold at least 100 securities and as many as 1,500. To buy and manage all those shares individually just isn’t realistic. By investing in one index fund, you can diversify your portfolio across a hundred or more securities.

Passive funds can also be used as building blocks to create a portfolio of funds tracking different asset classes, sectors, and regions.

Best Passive Funds Brokers

If you are looking for a broker to invest in the best passive investment funds UK, you’ll want to consider the fund selection on offer and the fees you will pay. We have reviewed the following two platforms you may want to consider.

  1. eToro – Overall Best UK Passive Funds Broker – 0% Commission

Best UK Passive funds at eToroOne of the objectives of passive investing is keeping costs down. eToro can help you do just that with its zero-commission policy. The platform which was founded in 2007 now has 20 million users thanks to its wide selection of securities and zero-fee approach.

eToro is a broker, so it only offers access to tradable securities. This means that in terms of passive investments, there are 249 ETFs, but mutual funds aren’t available. Besides ETFs, you can invest in stocks, currencies, cryptocurrencies, commodities, and indices. In total there are over 2,000 securities to choose from on the platform. Most trades are executed in the form of a CFD which means you can use leverage and easily short sell securities.

eToro is also well known for its social and copy trading features. There is an active community of investors who regularly share information and ideas. You can also track the performance of experienced investors and then elect to copy their trades automatically.

The platform is very easy to navigate thanks to the intuitive and uncluttered layout. You can open an account in a few minutes and there are several options when it comes to funding your account.

eToro is regulated by the FCA in the UK and CySEC in Cyprus. Client funds are also protected by FSCS insurance.

eToro UK passive fund broker

Pros

  • Large number of asset classes and instruments.
  • Wide range of ETFs.
  • Zero commission policy.
  • Social and copy trading features.
  • Intuitive and easy to navigate website.
  • Deposits can be made with a debit/credit card, e-wallet, or UK bank account.
  • eToro is regulated by regulatory the FCA, the main UK regulatory body.

Cons

  • No mutual funds or ISAs.

67% of retail investor accounts lose money when trading CFDs with this provider. 

  1. Fineco – Low-Cost Broker for Passive Fund

Fineco is a banking group that is based and listed in Italy. Fineco’s platform offers a wider number of services than the typical broker because it is part of a banking group. This means it can offer banking services, and access to mutual funds. For UK investors the platform can also be used for ISA investments. You can also trade stocks, ETFs, and CFDs on the platform.

If you want to invest in passive funds, Fineco gives you access to index funds managed by companies like Invesco and JP Morgan, as well as ETFs which you can trade in a normal trading account or an ISA.

The fees you pay will depend on the type of funds you choose to invest in. For index funds there are no dealing fees, but you will need to pay an annual platform fee of up to 0.25% of the account value. This fee is lower if you invest more than £250,000. If you choose to invest in ETFs, there is a dealing fee of £2.95 for UK stocks and £3.95 for US and European stocks and ETFs.

fineco index funds

Fineco has a proprietary trading platform with interactive charts and a stock screener to filter stocks. The platform can also be used on mobile devices. Fineco is regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK.

Pros

  • Mutual funds and ETFs.
  • No dealing charges for mutual funds.
  • You can use the platform to invest in an ISA.
  • FCA and PRA regulated.
  • Part of a large banking group.
  • Useful stock screener.

Cons

  • Annual fee of 0.25% on index funds.
  • Commission on ETF trades.

Your capital is at risk.

How to Invest in Passive Funds on eToro Tutorial

Investing in the best UK passive funds only takes a few minutes on the eToro Platform. This tutorial will guide you through the process which should take less than five minutes.

Step 1: Open your eToro Account

To start the process, navigate to eToro’s landing page, and click on the ‘Join Now’ button. All you will need to enter at this point is your email address and a username and password of your choice. This will create your basic account.

Open passive investing eToro account

67% of retail investor accounts lose money when trading CFDs with this provider. 

Step 2: Verify your Identity and Address

The next step requires you to enter some more information and verify your identity, email address, and phone number. You will receive an email and an SMS to verify your contact details.

To properly verify your account, you’ll need to upload a copy of your ID and a bank statement or utility bill. However, you can deposit up to £1,600 and begin trading and verify your account later.

Verify eToro account

Step 3: Deposit Funds into your Account

There are several methods you can use to deposit funds into your account, including debit and credit cards, bank transfers, and eWallets like PayPal and Skrill. We recommend the credit and debit card option as it is the fastest. Simply select the method you want and follow the prompts to complete your deposit.

eToro deposit funds

Step 4: Search for your chosen Passive Funds (ETFs)

If you know which fund you want to invest in, you can type the ticker code or part of the name into the search bar at the top of the page.

Alternatively, you can navigate to ‘Trade Markets’ on the menu and then select the ETFs tab. This will allow you to browse all the ETFs on the platform.

Select Best Passive Fund UK

67% of retail investor accounts lose money when trading CFDs with this provider. 

Step 5: Make your Passive Fund Investment

Once you have found the fund you want to invest in, click ‘Trade’ to open an order entry ticket. You can trade immediately at the current price by selecting ‘Trade’, or you can enter an order with a limit by selecting ‘Order.’

Once you have selected the amount you want to invest and a limit price, if applicable’ you can click ‘Set Order’ or ‘Open Trade’ to send the order to the market.

Enter order to buy ETF

eToro – Invest in Passive Funds with 0% Commission

Long-term investors make most of their returns by simply being invested in the market, rather than trying to trade in and out of the market. Passive funds are designed for doing just that while keeping costs to a minimum. You can hold just one passive fund, or use them as building blocks to build a portfolio with exposure to a variety of markets and asset classes.

We recommend eToro for passive investing because they don’t charge a commission, and low costs are a key component of the strategy. You can set up an account and invest in one of the 249 passive funds on offer in just a few minutes.

Best UK Passive funds at eToro

67% of retail investor accounts lose money when trading CFDs with this provider. Your capital is at risk

FAQs

What is the difference between active and passive funds?

Are passive funds better than active funds?

What is the difference between a passive mutual fund and an ETF?

Are tracker funds the same as passive funds?

Do passive funds pay dividends?

About Richard Bowman PRO INVESTOR

Richard Bowman is a writer, analyst, and investor based in Cape Town, South Africa. He has over 18 years’ experience in asset management, stockbroking, financial media, and systematic trading. Richard combines fundamental, quantitative, and technical analysis with a dash of common sense.

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