Do tracker funds with the lowest charges give the best returns?
Not necessarily. How closely a fund tracks its chosen stock market index (known as ‘tracking error’) can also have an impact on your returns. Some trackers don’t invest in all the shares on an index. Instead they select a ‘sample’ of shares to invest in, which is really active management by the back door, and will affect your returns. A ‘fully replicated’ tracker which buys shares in every company on the index will track the index closer. Also, always check charges carefully. Some companies advertise what appears to be the lowest charging tracker, but there are often strings attached, or other charges that can bump up the cost.
