What is the Best FTSE 100 ETF
We look at your ETF options if you are looking to invest in the FTSE 100
- What is a FTSE 100 exchange-traded fund (ETF)? »
- 3 Top ETF FTSE 100 Picks »
- How to buy the FTSE 100 using ETFs »
- How do investment platform costs compare when investing in a FTSE 100 ETF? »
What is a FTSE 100 exchange-traded fund (ETF)?
Exchange-traded funds (ETFs) are investments that look to mirror the performance of a particular market index.
They are passive investments and aim to replicate the movement of an index and deliver returns closely matched to the Index being tracked.
In an ETF that tracks the FTSE 100, returns will reflect the performance of the top 100 UK firms by capitalisation that make up the Index. Current constituents of the FTSE 100 include companies such as AstraZeneca, BP, Rolls Royce, Shell and Unilever.
How do exchange-traded funds work?
Exchange-Traded Funds work by:
- Full Replication – physically buying shares of the 100 companies that make up the FTSE 100 or by
- Partial Replication – using more complex investments to replicate the movement in the Index.
Some tracker funds attempt to fully replicate the Index by holding all of the constituent shares in approximately the same proportion as their weighting in the Index.
Other tracker funds use an index sampling process holding a representative sample of shares that approximate the full Index, mirroring key risk factors and other characteristics.
Tracking error measures the volatility of the return difference between the fund and the FTSE 100 index.
It is calculated as the standard deviation of the tracking difference between the tracker fund and the Index (gross of fees for the trailing 36-month period or since the fund’s inception if it does not have 36 months of performance history).
A low tracking error means an index tracker fund closely follows the FTSE 100 Index’s performance. The tracking error gives you a measure of how closely the fund is replicating the FTSE 100.
With index tracker funds that are generally passively managed, the lower the tracking error, the better.
3 Top FTSE 100 ETF Fund Picks
Each of the funds listed above employs a “passive” investment strategy designed to replicate the performance of the FTSE 100 index.
1. iShares Core FTSE 100 UCITS ETF
According to Interactive Investor, the second most popular FTSE 100 ETF fund bought by investors in the first quarter of 2023 was the iShares Core FTSE 100 ETF.
Launched in 2000, this index tracker fund replicates the FTSE 100 and has a low ongoing charge of 0.07%.
Managed by BlackRock, this is a large fund with over £11.23 billion (ISF) invested (as at 14/3/2023).
iShares run two versions of the fund: Accumulated Fund (stock code: CUKX), where dividends are accumulated.
Distribution Fund (stock code: ISF) where dividends are paid out. Dividend income is paid quarterly (Income yield as of February at 2023 was 3.54%). If the fund is held in an ISA, this income is not subject to income tax*.
2. Vanguard FTSE 100 UCITS ETF
According to Interactive Investor, the Vanguard FTSE 100 ETF was the 7th most popular ETF fund purchased through its platform in the first quarter of 2023.
Launched in 2012, this index tracker fund replicates the FTSE 100 Index and has a low ongoing charge of 0.09%.
Managed by Vanguard, the fund has £4.7 billion (VUKE) invested at the time of writing.
Vanguard runs two versions of the fund:
Accumulated fund (stock code: VUKG) where dividends are accumulated.
Distribution Fund (stock code: VUKE) where dividends are paid out. Dividend income is paid quarterly (Income yield as of February 2023 was 3.84%). If the fund is held in an ISA, this income is not subject to income tax*.
3. Wisdom Tree FTSE 100 3x Daily Leveraged
According to Interactive Investor, the Wisdom Tree FTSE 100 3x Daily Lvrgd ETP was the 8th most popular ETF fund purchased through its platform in the first 3 months of 2023.
The objective of this product is to track the FTSE 100 Daily Super Leveraged RT TR index, or the “Index”, to provide three times the daily performance of the FTSE 100 Net Dividend TR index (the “Benchmark”), adjusted for the costs associated with maintaining a leveraged position in stocks.
For example, if the Benchmark rises by 1% over a day, the ETP will increase by 3%. On the other hand, if the Benchmark falls by 1% over a day, then the ETP will fall by 3%. Fees and funding costs are excluded in both cases.
How do investment platform costs compare when investing in an FTSE 100 ETF?
Today’s investor in 2023 has a lot of investment platform options to choose from.
“One of the key considerations is cost… However picking the “cheapest” is not as simple as it sounds, as each platform has its own costing model which often makes it difficult to compare like for like”.
Below we have outlined what you can expect to pay in charges for 4 of the UK’s most popular investment platforms based on investing in a low-cost tracker fund (iShares Core FTSE 100 UCITS ETF).
As you can see below, the amount you invest will determine the platform’s cost-effectiveness. For more considerable sums, Interactive Investor with a flat fee model offers value for money, while AJ Bell is worth considering for sums under £100k.
| Platform | Annual Platform Fee | iShares OCF Fund Charge |
Annual Charge on £10K |
Annual Charge on £40K |
Annual Charge on £100k |
|---|---|---|---|---|---|
| Interactive Investor | £9.99 pm flat fee | 0.7% | £126.88 | £154.88 | £189.88 |
| Hargreaves Lansdown | 0.45% up to £249,999, reducing to 0.25% from £250,000 to £1m, reducing to 0.10% from £1m to £2m. No fee for assets over £2m |
0.7% | £52 | £208 | £520 |
| AJ Bell | 0.25% on the first £250K | 0.7% | £32 | £128 | £320 |
As you can see, the right platform for you will depend on how much you are investing.
Other considerations include:
- How easy is the platform to use, and what tools and research are on offer
- What fund discounts are there? different platforms have negotiated additional discounts on funds
- Customer reviews – helpful in understanding the strengths and weaknesses of platform providers
- Level of customer service provided
Trading or investing in the FTSE 100 – What is the difference?
Trading the FTSE 100:
“If you are looking to trade the FTSE to make short term profits you can use products such as CFDs and spread bets to speculate on a FTSE 100 ETF share’s price increasing or decreasing without having to take direct ownership of the shares themselves”.
CFDs (Contracts For Difference) and spread betting are leveraged products, which means you can gain full exposure to the FTSE 100 through an ETF while only putting down a small deposit. While this magnifies possible profits, it does the same for losses.
Short-term traders like CFDs and spread bets because profits and losses are realised instantly, and trades can be opened and closed more quickly.
However, this doesn’t mean you can’t use them for longer-term positions too.
You’d need to consider the costs involved in maintaining a position – such as overnight funding – and the bet duration, as spread bets have fixed terms.
They also enable you to buy and sell shares online without owning the underlying asset. This has tax benefits and means you can trade both rising and falling markets (Tax laws are subject to change).
Investing in the FTSE 100:
As an investor, you will be looking to invest in the companies that make up the FTSE 100 in the hope that, over time, the Companies that make up the Index will grow & generate good profits.
You typically will be investing for the longer term, e.g. 5 years or more is expected.
When you buy shares, you become a part-owner of that Company and gain shareholder rights, including any income paid as dividends.
Profits you make on share trading capital gains and dividends earned may be subject to tax at your rate. Taxation can be mitigated if you trade within an ISA or Self Invested Personal Pension account.
How To Buy The FTSE 100 Using ETFs
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- Select a share platform – See below our top 3 platform picks
- Open your share account – To do this, you will need your bank details and national insurance number
- Fund your account – You will need to fund your a/c with a debit or credit card or bank transfer
- Search for the ETF using the stock code – Type the stock code into the search box
- Check out the latest info and price for the selected ETF – Some platforms offer free research and analysis
- Buy the ETF – Nice and easy!
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Our view: The next generation of online trading platforms means you can buy ETF funds in as little as 10 minutes! See our top picks for buying ETFs below:
| Join today & get £50 FREE trading credit (T&Cs apply). More than 40,000 UK & international investment options Invest from £1 Features: Flat fee plan starts from £4.99 pm No trading fees when you top up monthly with the ii regular investing service. | Go to website » | |
| Trusted by over 400,000 people. Fully FSCS protected. ADVFN Winner 2022 "Best Low Cost Stockbroker". Capital at risk. | ||
| Trade UK & International shares for £6. No charge for fund trades Features: One simple customer fee of 0.25% p.a. 8,000+ investments to choose from. | Go to website » | |
| Barclays gives you the investment choice and research tools you need to grow your money. Over 300,000 people have used our award winning service, expert insights and resources to help work towards their financial goals. Voted Best Stockbroker at the Online Money Awards 2023. Capital at risk. | ||
| Choose from over 2,000 funds From £25 per month Features: Low cost ISA. Multi-award winning ISA provider. Trade from: £1.50 Funds £5.00 Shares, ETFs, investment trusts and gilts and bonds £3.50 Frequent shares dealing charge | Go to website » | |
| Trusted by over 1.5 million people. FSCS protected. Capital at risk. Other charges may apply. No subscription required | ||
| Choice of 700 low cost ETF Funds Invest from £100 Features: No buying or selling fees. Choose either commission free DIY investing, or an actively managed portfolio (0.25% charge annually). Powerful automation. Easy diversification. ETFs costs apply SPECIAL OFFER: Get a Welcome Bonus of up to £50 when you invest at least £100 with InvestEngine (Capital at risk, Ts&Cs apply). | Go to website » | |
| The InvestEngine offers investors a low cost ETF investment platform. Build your own portfolio commission free or leave it to their experts for just 0.25%. Build your own low cost portfolio using managers such as Vanguard, iShares & Invesco. FSCS protected. Capital at risk. | ||
| Buy & trade over 17,000+ shares online. FX conversion fee of just 0.5%. Invest from £1 Features: Easy to use platform. Demo account. Speak to other traders. Award winning trading app. | Go to website » | |
| IG offer exclusive out of hours giving access to 70+ shares when the market is closed. 313,000+ clients worldwide. FCA Regulated. Capital at risk. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. | ||
| Invest in real stocks with 0% commission*. Over 5300 instruments… Features: XTB is one of the largest stock exchange-listed FX brokers in the world with 720,000+ customers and over 20 years of activity in the financial markets. Capital at Risk Earn 5.2% interest rate per annum on uninvested GBP | Go to website » | |
| World class trading platform: Easy to use, fully customisable, superior execution speeds, performance statistics. Applying for an account is quick and easy with a secure online form, and you could be trading within minutes. Wide range of instruments -forex, indices, commodities, shares and ETF’s. Multilingual customer support team is ready to help you - 24h hours a day from Monday to Friday. *For monthly turnover up to 100,000 EUR (then comm. 0.2%, min. 10 EUR). Capital at risk | ||
| Invest in over 6,100+ US, UK & EU stocks & ETFs commission-free Features: Start with £2 investment. Superb app design and transparent account charges. Great for beginners and experienced investors alike | Go to website » | |
| Mobile app - manage your portfolio on the move. FSCS protected. Capital at risk. | ||
| Access over 3,000 funds. UK & Overseas shares. Invest from £100 or £25 pm Features: Live share prices. Award winning services. | Go to website » | |
| Hargreaves Lansdown is the UK's No 1 platform for private investors trusted by over 1.6 million customers. Capital at risk. | ||
| Access to 70,000+ instruments, smart trading tools & market insights Investment platform for different needs and experience levels | Go to website » | |
| Saxo serve clients in 170 countries, hold 70+ bn GBP in assets under management & process 1m transactions daily. FCA regulated. Capital at risk. | ||
| Buy & trade over 3500+ UK, EU and US stocks with low 0.35% currency conversion. Features: Say goodbye to high minimums and barriers to entry. Introducing the high interest vaults offer: - Interest rate: 5.21% APY on GBP, 3.83% APY on EUR, 5.39% APY on USD - Pricing: 0.25% total fees for all deposit sizes - Minimum amount: £1, €1, $1 - Maximum amount: No limit Capital at Risk | Go to website » | |
| Multi-currency investing, your money goes even further without the constant foreign exchange fees. Deposit, hold and invest in international stock markets in EUR, GBP and USD — all under one roof. Shares have a low, transparent execution cost. Investing in your local ETFs is completely free of Lightyear fee (other fees may apply). Earn interest on uninvested cash. Access live news feeds about the stocks you own, as well as professional analyst ratings & price targets. Lightyear is now live on web and has launched earnings calls audios. Capital at Risk. We, Fair Investment Company, will be paid a referral fee if you open an account and deposit funds through some of the links on this page. This includes financial promotion. | ||
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