Tracker fund definition

Funds, also called ‘tracker funds’, are financial instruments that have been set up to match or ‘track’ the price of a market index. Investing in a fund lets you get exposure to different financial assets like shares and bonds, without having to buy them directly.

Home Investing glossary Tracker fund

What is a tracker fund?

A tracker fund (also known as an index fund) is a type of investment fund that aims to match the performance of a specific stock market index – like the FTSE 100 or S&P 500 – rather than trying to beat it.

Benefits of tracker funds

Instead of a fund manager picking stocks, a tracker fund automatically invests in all (or most) of the companies in the index it follows. That means:

  • Lower fees (because there’s less hands-on management)
  • Broad diversification (you’re spreading your money across lots of companies)
  • Performance that rises or falls in line with the index

It’s a popular choice for investors who want a simple, low-cost way to follow the market.

Capital at risk. All investing should be long term. The value of your investments can go up and down, and you may get back less than you invest.

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Investing glossary

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Capital at risk. All investing should be for the longer term. The value of your investments can go up and down, and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in the future.

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Payments you make into your pension won’t be accessible until the minimum pension age (currently 55, increasing to age 57 from 2028). Tax treatment depends on individual circumstances and may be subject to change in the future.

For Business Saver: T&Cs apply. Max one withdrawal per day.

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