Welcome to the new morningstar.co.uk! Learn more about the changes and how our new features help your investing success.

Do You Invest in Passive Funds?

MARKET REACTION: As part of a special feature week into active vs passive investing, we asked the public what they held in their portfolio 

Emma Wall 27 October, 2014 | 10:22AM

This article is part of the Morningstar's Guide to Active vs Passive Investing. Click here for our edit on how the experts use the tools at their fingertips, finding out whether you prefer one to the other and examining how to blend active and passive investing for profit.

 

 
 

Passive investing, using tracker funds or exchange traded funds are a pooled investment fund, where an individual can gain exposure to a particular index or commodity, providing the investor with the same returns as the underlying market. While these tools can never outperform the index that they track they will only ever underperform it by the cost of the investment – which can be as little as 0.2% a year.

This week we will be examining the benefits of these two investment approaches, listening to how the experts use the tools at their fingertips, finding out whether you prefer one to the other and examining how to blend active and passive investing for profit.

ETFs are funds that are traded on a stock exchange like shares. They are a pooled investment fund, where an individual can gain exposure to a particular index or commodity, providing the investor with the same returns as the underlying market. There is an extremely wide range of ETFs available to the investor, who can invest in things as diverse as soy beans, forestry and timber, as well as a FTSE 100 tracker or corporate bond fund ETF. 

In 2013, $247.3 billion was invested globally into equity ETPs, the largest inflows ever according to ETP provider iShares. This far outpaced the flows seen in 2008 - the only other year inflows surpassed £200 billion. Even fixed income ETP investment grew – up $27.5 billion globally – while in the UK open-end bond funds recorded outflows for the first time on record. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Wall  is former Senior International Editor for Morningstar

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites