Where Your Money Goes in Passive FTSE Trackers

An increasing number of investors are putting their money into passive funds that buy shares based on the significance of the companies within the tracker they are investing in. This simple method of investing is hands off, cheaper than an active fund where the managers are selective about what they invest in, and offer an easy way to guarantee that your portfolio is diverse and protected against the ill fortunes of any particular company.

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shareprices.com - Tuesday, May 02, 2017

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Royal Dutch Shell 'A'

If you invest in a passive tracker that targets the FTSE 100, then your portfolio will change from day to day, as different companies dominate the index, but it’s fairly easy to get a good idea of where your money is going.

Right now, Royal Dutch Shell dominates the index. 9.2% of the weighting of the index goes towards the oil company. HSBC holds 6.9 percent of the weighting, and British American Tobacco holds 5.4 percent. In total, there are 12 companies in the FTSE 100 that make up 49.5 percent of the weight of the index. The remaining 50.5 percent is split between the remaining 88 companies.

So, while on the surface a passive tracker is a way of beating the market, it might not actually be that great if you want exposure to a wider range of industries, or don’t want to put a huge portion of your money into just 12 companies. Active funds may cost more, but the managers are more selective, and you’re more likely to have a chance at beating the market.

 

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