Paying too much to invest? How tracker funds could save you hundreds of pounds

You can get better returns at a fraction of the cost by putting your money in what is called a "tracker" fund.

Published: September 21, 2026 at 11:22 AM

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Are you paying someone to invest your money in funds that they manage in the hope of getting the best return? If so, their fees are almost certainly a waste of money.

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You can get better returns at a fraction of the cost by putting your money in what is called a “tracker” fund.

Invented 50 years ago, these funds involve no human judgement or prediction about which firms or investment will do well. Instead, they invest your money in all the companies in an index such as one of the FTSE indexes of companies on the London Stock Exchange or a global index of firms around the world.

In the long term these index trackers – sometimes sold as Exchange Traded Funds (ETFs) – produce better returns than managed funds.

Research by Dow Jones shows that over the 10 years to the end of 2025, across Europe and globally, trackers beat 95 per cent of the managed funds in the same markets. And while some might beat the tracker some of the time, it’s impossible to predict which will do that in future.

One reason trackers give you more is cost. At the bottom of every investment pot is a little “tap” – out of which your money drips into the firm that manages it.

A tracker can cost you as little as 0.04 per cent – a fee of 40p for every £1,000 invested. A managed fund can charge you 30 times as much – 1.2 per cent, which would be £12 per £1,000.

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On a £20,000 Isa that would save you £232 a year, and usually for a better result!

The financial research firm Morningstar says that since 2019, more than half the money of ordinary investors in the USA has been in trackers.

But in the UK our Investment Association says barely a quarter is.

One reason is that many advisers still recommend managed funds. Commission for selling them was banned in 2012, but some clearly believe what they told their customers in the past – such as “trackers follow the market down as well as up”.

Which is true. But managed funds can also go down – though however badly they perform, the same fee is charged.

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The safest advice is to trust your money to the market. A good independent financial adviser will find you the cheapest appropriate tracker. Or you can find one yourself online from a reputable firm.

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