Investment service provider Hargreaves Lansdown (LSE: HL) has taken a lot of stick from the media lately because it kept the Woodford Equity Income fund on its ‘best buy’ list right up until the fund was locked up in response to liquidity challenges.
However, I think that was an easy mistake to sleepwalk into because Woodford had such a strong reputation based on past investing glories. Indeed, Neil Woodford looked like a safe pair of investing hands to many, including me.
Empowering the private investor
Putting aside for a moment whether or not the Hargreaves Lansdown share price plunge makes the firm a decent investment in itself, I think the firm does a lot of good for the private investor. The website is well worth a look for the information it provides, and the company has made access to investment funds easier than ever, often at reduced rates because of special deals the firm offers investors.
I reckon stock-picking underperformance such as that delivered by Woodford in recent years must make index-tracking funds even more appealing to private investors. Passive investing in low-cost index tracker funds has always been attractive, but many must be asking the question, “why pay for an expensive fund with a manager at all when finding a good one seems fraught with difficulty.”
There’s a lot to like about the idea of simply tracking the overall performance of a market or share index and using the principle of compounding to deliver decent returns in the long run.
But many investors already know that, and Hargreaves Lansdown recently published on its website a list of the five most popular index tracker funds chosen by its clients in May 2019 measured by net buys. I think the list is a good one. Indeed, when it comes to picking funds, UK investors know a thing or two. Here is the list in alphabetical order:
Legal & General All Stocks Gilt Index Trust
This tracks the performance of the FTSE Actuaries UK Conventional Gilts All Stocks Index. It’s a handy investment vehicle if you want to put some of your portfolio in gilts, which are bonds denominated in British pounds issued by HM Treasury.
Legal & General International Index Trust
The objective of this fund is to provide growth by tracking the performance of the FTSE World Index excluding the UK. It invests almost entirely in company shares, so it’s a good way of exposing your portfolio to world stock markets.
Legal & General UK Index
Tracks the FTSE All Share index. A great way of following the markets in the UK.
Legal & General US Index
This tracks the FTSE USA index and gives you exposure to some of America’s most successful firms such as Microsoft, Apple, Amazon, Alphabet, Facebook, Berkshire Hathaway, Johnson & Johnson, JPMorgan Chase & Co, and Exxon Mobil.
Vanguard LifeStrategy 80% Equity
This fund invests 80% in stocks and 20% in bonds. It does so by investing in Vanguard passive index funds and sometimes directly into stocks and bonds.
You can get decent exposure to world markets at a reasonable price with these funds. I think they are great vehicles for compounding your investment pot over time.