Buying a cheap exchange-traded fund that simply tracks the return of the FTSE 100 index is never a bad idea. Especially if it’s within a tax-efficient Stocks and Shares ISA. It’s certainly a far better long-term bet than staying in cash. In addition to any capital gains, you’ll also receive dividends which, ideally, can then be reinvested and allowed to compound.
Having said this, I think there are far better passive fund options for those wanting to really grow their wealth over time.
FTSE 100 beater We’ve known for some time that populations across the world are ageing and the demand for healthcare will only increase as a result. The coronavirus pandemic has merely served as a further shot in the arm for the sector. One way of tapping into this is through the iShares Healthcare Innovation UCITS ETF.
With almost two-thirds of the portfolio made up of US stocks, performance at the fund has been excellent. By the end of last month, it had gained 69% since launch in 2016. That return becomes even more impressive when you consider the low 0.4% ongoing charge. For comparison, the FTSE 100 is down 13% over the same period.
Considering the defensive qualities of the industry, I think this 137-stock fund looks a solid long-term buy for anyone averse to actively picking stocks.
Look overseas It’s understandable that many UK investors like to invest their money in their (highly regulated) home market. The problem with this approach, however, is that your capital isn’t as well diversified as it could be. With Brexit likely to rattle on for some time to come, this could compromise returns.
One way around this is to buy shares in passive funds tracking markets in other parts of the world. For me, the iShares Emerging Markets Core UCITS ETF is one that stands out.
The fund has exposure to 2,700 stocks, including mid- and small-cap companies. As experienced Fools will know, it’s often these firms that can turbocharge performance. The ongoing charge is just 0.18% — not much more than a FTSE 100 tracker.
By far the biggest draw for me, however, is the fact that some of these markets trade on even cheaper valuations than the UK! When you consider how much the economies of India, Vietnam and South Africa could evolve over the next few decades, now looks like a great time to get involved.
Get some gold The gold price has lost some of its shimmer in recent weeks but I think Fools should still have some exposure to the precious metal. After all, its tendency to rise when shares fall may come in handy as the full economic impact of the coronavirus is felt across the world. Despite already performing superbly in 2020, some in the market are suggesting the gold price could rise as high as $3000 per ounce.
A simple fund that tracks the gold price will likely be suitable for most investors. Those with far greater risk tolerance, however, could buy the VanEck Vectors Junior Gold Miners ETF (NYSE:GDX). Its 81-stock portfolio may end up being a lot more volatile than a typical FTSE 100 tracker but it’s arguably a far safer way of betting on the shiny stuff than holding shares in a single company.
Since launch in 2015, the fund has returned a little over 18% annually. The management fee is 0.55%.
The post Forget the FTSE 100. I think these ISA-ready passive funds are begging to be bought! appeared first on The Motley Fool UK.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool
