Three tracker pitfalls to avoid

Passive funds that track an index or asset are simple and cheap. Yet some funds track better than others. So how do you know which fund to buy? Tim Bennett explains.

Passive funds that track an index or an underlying asset, such as gold, have two major benefits they are simple to understand and they are cheap compared to active funds. What's more, if you buy them in the form of an exchange-traded fund, they have another benefit over the many unit trusts (passive or active), which is that you can buy or sell them at any time.

However, all is not equal in the world of the tracker fund. Some track better than others. Here's a summary of the key pitfalls to avoid when choosing one.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.