A fully flexible way to invest
3 minute read
Equity income investors look to the UK because it has always been a high yielding market. Although there are plenty of actively managed funds to choose from, there’s also an interesting tracker fund to add into the mix for consideration. A tracker fund that aims to deliver a higher level of income than the market and with the potential for some capital growth.
Who's it for? All investors
Investors looking for an income and an opportunity for capital growth, have typically looked to the UK as an obvious place to start. The UK stock market has historically paid higher dividends than most other markets around the world. And investors can focus on an even higher income, by focusing just on those companies which pay higher dividends. Although there are a number of actively managed funds to choose from, there’s also an interesting tracker fund – the Vanguard FTSE UK Equity Income Index Fund.
Investors looking at tracker funds to invest in the UK market typically steer towards a fund that tracks the FTSE 100 Index, an index that represents the 100 largest companies listed on the London Stock Exchange. The Vanguard FTSE UK Equity Income Index Fund, on the other hand, tracks a different index. The fund tracks the FTSE UK Equity Income Index, which can be differentiated from the FTSE 100 Index in two main areas.
First, the index will invest in medium-sized companies as well as the larger companies. This is a market made up of 350 companies, from which to select suitable dividend-paying shares to invest in. Secondly, the FTSE UK Equity Income Index will only invest in the shares of companies which are paying the highest dividends. It does not include any shares that do not pay dividends.
So what does a tracker fund tracking the FTSE UK Equity Income Index look like? As at 30 November 2021, the Vanguard FTSE UK Equity Income Index Fund was invested in the shares of 89 companies, which is not too different to the 100 companies of the FTSE 100 Index. And at the same date, the Vanguard fund had a yield of 4.4%, which is higher than that of the FTSE 100 Index and the UK market as a whole.
It’s important to understand that the number of holdings and the yield will change over time. The Vanguard FTSE UK Equity Income Index Fund aims to track a specific index, in order to deliver a higher than average income, and so it will have periods when it underperforms the wider market.
To gain general exposure to the higher yielding parts of the UK market, the Vanguard FTSE UK Equity Income Index Fund could be worth looking at. Being a tracker fund, it is operated automatically rather than by a fund manager, which dramatically reduces its running costs.
If passive funds appeal to you, you may wish to look at the tracker funds in the Barclays Funds List. We have selected 12 tracker funds which allow you to track the performance of different investment sectors at a low cost. Find out more information on these funds.
The tracker funds on our Funds List are selected solely on cost – those featured are simply the cheapest available tracker fund we offer in each sector where a relevant product is available. The funds included in this selection are reviewed every six months, in June and December.
Correct at the time of publishing.
To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These Barclays multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.
Past performance of the fund and its manager are not a reliable indicator of their future performance.
We don’t offer personal investment advice so if you’re unsure you should seek that independently.
Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.
These are our current opinions but the future, as ever, is uncertain and outcomes may differ.
Read the Assessment of Value report [PDF, 3.2MB] for funds run by Barclays.
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.
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