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Best Investment Funds UK 2020

Based in the UK and looking to invest in a fund? In this guide, we explore the best investment funds available to UK residents in 2020.
Kane Pepi
Author: Kane Pepi

Last Updated: October 14, 2020

Investment funds appeal to a variety of investors. Whether you’re looking to invest in a passive nature or want to gain access to a diverse basket of assets – there is an investment fund to cover most bases.

All you need to do is find an FCA broker that offers your chosen fund, make a deposit and that’s it – there is nothing more for you to do until you decide to cash the investment out. But, how do you know which UK investment fund to choose?

In this guide, we unravel the best investment funds in 2020. We’ll also walk you through the process of getting started with a fund investment, and discuss the best UK brokers to do this with.

Table of Contents

    Top Investment Funds in the UK

    Don’t have time to read our guide in full? Below you will find an overview of the best investment funds of 2020.

    1. S&P 500 Index – Best Long-Term Investment Fund for Stocks and Shares
    2. Fundsmith Equity – Best Managed Investment Fund of Recent Years
    3. Vanguard Global Balanced Fund – Invest in a Basket of Stocks and Bonds
    4. Stewart Investors Worldwide Sustainability – Invest in Sustainable Companies
    5. Blackrock UK Fund – Mutual Fund With a Strong Focus on Large UK Companies
    6. iShares FTSE 100 UCITS ETF – Track the FTSE 100 Like-for-Like
    7. Vanguard Target Retirement (Various Durations) – Best Pension Investment Fund

    Overall Best Investment Funds

    There are literally thousands of investment funds available to UK investors. Best of all, most of these funds can be invested in from the comfort of your home – with the end-to-end process rarely taking more than 10-15 minutes.

    With that said, there are two investment funds, in particular, that stand out for us at the time of writing – which you’ll find listed below.

    S&P 500 Index – Best Long-Term Investment Fund for Stocks and Shares

    If you’re looking to invest in a fund that focuses on the long-term growth of stocks and shares, then it’s difficult to get away from the S&P 500 index. This particular index tracks 500 large-scale companies in the US. This includes some of the biggest global brands – including but not limited to Disney, Nike, Ford, Apple, Amazon, Facebook, and IBM.

    The best thing about this investment fund is that you will be highly diversified. Not only in terms of the number of individual holdings – but the fact that you will be exposed to most industry sectors. For example, your basket of 500 shares will cover food and beverage, tech, industrials, financials, consumer goods, and insurance. The index itself is rebalanced regularly to take into account the ups and downs of individual constituents.

    Vanguard S&P 500 ETF

    It is also weighted in favour of those with a large market capitalisation. When you invest in the S&P 500 index through a fund, you will also be entitled to dividends. This is usually distributed every three months. As the S&P 500 is the most liquid stock market index in the world, it makes sense that there are heaps of providers that give you access.

    Since its inception in 1926, the index has made average annualised returns of over 10%. This is much better than the FTSE 100 – which has struggled in recent years. In our view, the easiest and most cost-effective way of doing this is to invest via an ETF. The likes of Vanguard offer an S&P 500 ETF which – when using FCA broker eToro, can be invested in on a commission-free basis. You can also invest from just $50, which is great for diversification purposes.

    75% of retail investor accounts lose money when trading CFDs with this provider

    Fundsmith Equity – Best Managed Investment Fund of Recent Years

    In the case of the S&P 500, your chosen investment fund provider will simply look to track the index like-for-like. However, if you are looking for a fund that is actively managed, you might want to consider Fundsmith Equity. This mutual fund – which is managed by Terry Smith, is one of the best forming of recent years.

    In fact, had you invested in September 2015, you would be looking at 5-year returns of over 160%. This means that Terry Smith has a knack at consistently outperforming the wider markets. In terms of strategy, the Fundmisth Equity fund focuses exclusively on stocks and shares.

    Although the investment fund is UK-based, over 82% of its holdings are in foreign equities. Most of Smith’s selections are centred on major US companies like Facebook, Microsoft, and Philip Morris. With that said, there is also a selection of UK stocks, too.

    If you want to gain exposure to this particular investment fund, the easiest way to do it is via Hargreaves Lansdown. This UK-based FCA investment platform allows you to invest from just £100 – or at £25 per month via direct debit. You will need to pay a fee of 0.45% annually, albeit, there are no performance commissions.

    Your capital is at risk.

    Best Investment Funds for Beginners

    If you’re keen to invest in a fund, but you’ve got little to no experience of where to start, there are several options that are suited to newbies. At the forefront of this are funds that focus on high-grade, low-risk assets – alongside low account minimums and fees.

    Beginner-friendly investment funds that you might want to consider include:

    Vanguard Global Balanced Fund – Invest in a Basket of Stocks and Bonds

    This particular investment fund is great for newbies – not least because you will be creating a highly diversified portfolio of both stocks (61%) and bonds (31%). The former consists of 85 different companies from a variety of sectors and markets. Just over 61% come from the NYSE and NASDAQ – including firms like Microsoft, Cisco, and McDonald’s.

    VANGUARD GLOBAL BALANCED

    In terms of its bond holdings, the Vanguard Global Balanced Fund currently has over 470 instruments. The average duration of each bond is 6.9 years, with an average coupon rate of 2.4%. Crucially, more than half of its bond holdings are rated, AAA, AA, or A.

    When it comes to making an investment, you have several options at your disposal. You can invest directly with Vanguard at an annual charge of 0.48%. This comes at a minimum lump sum of £500, or £100 per month via direct debit. Alternatively, you can invest with Hargreaves Lansdown for just £100/£25 per month – also at 0.48% annually.

    Other beginner-friendly funds to consider include:

    • Axis Long Term Equity Fund: Invest in a diversified portfolio of small and large-cap equities
    • SBI Bluechip Fund: Target long-term growth via blue-chip companies that typically yield consistent dividends

    Your capital is at risk.

    Best Ethical Investment Funds

    Ethical investments are getting more and more popular with UK investors. Put simply, you will be investing in firms that find the perfect balance between ethics and long-term growth. Think along the lines of renewable energy and electric cars. In other cases, the ethical investment fund manager will ensure it avoids certain industries – for example, tobacco, alcohol, or military equipment.

    Below you will find a small selection of the best ethical investment funds available to UK investors in 2020.

    Stewart Investors Worldwide Sustainability – Invest in Sustainable Companies

    As the name suggests, this particular investment fund focuses on global companies that offer sustainable products and services. The fund manager will ensure that each firm operates in an ethical manner – with respect to metrics like employment conditions and non-harmful goods.

    Stewart Investors Worldwide Sustainability

    The fund only invests in publicly-listed stocks – of which 51 make-up the portfolio. Some of its largest holdings include Unilever, Hoya Corp, Ain Holdings, and Varian Medical Systems. In terms of specific industries, the Stewart Investors Worldwide Sustainability fund covers everything from technology and industrials to basic materials and consumer staples.

    The main drawback about this particular ethical investment fund is that it comes with high fees. For example, investing through Hargreaves Lansdown will cost you an upfront fee of 4%. After that, you’ll need to meet an ongoing of 1.59%. This is, however, reduced to 0.94% when you factor in the discount offered by Hargreaves. Once again, minimum investments start at £100, or £25 per month.

    Other ethical investment funds to consider include:

    • Baillie Gifford Positive Change: This ethical fund is up 69% over the past 12 months
    • Kames Ethical Equity Fund: Invests in ethical companies and avoids gambling, tobacco, munitions, and animal testing

    Your capital is at risk.

    Best Mutual Investment Funds UK

    Mutual funds operate much like any other investment fund, but with one key difference – they are actively managed. This means that the fund manager will look to outperform the wider markets by making shrewd investment decisions. Unlike traditional ETF trading or the best index funds in the UK, this particular fund type will determine which assets to buy and sell – and when.

    Our top mutual investment funds of 2020 are listed below.

    Blackrock UK Fund – Mutual Fund With a Strong Focus on Large UK Companies

    If you’re looking to invest in a mutual fund that targets UK companies, it might be worth considering the Blackrock UK Fund. In a nutshell, this fund looks to outperform the wider UK stock market. In order to quantify this, the fund seeks to outpace the FTSE 100 index.

    BlackRock UK Fund

    At the time of writing, this investment mutual fund has 52 individual holdings. At the forefront of this is AstraZeneca and Riot Tinto, which both contribute just over 6% each. You then have the likes of Reckitt Benckiser Group, Relx, and the London Stock Exchange at 5.3%, 4.5%, and 4.5% – respectively.  You’ll also find holdings in Next, Rightmove, and even Hargreaves Lansdown.

    All in all, this is a highly diversified portfolio of UK stocks from most industries. As is often the case when opting for a mutual fund over a more cost-effective ETF, the BlackRock UK Fund is on the pricey side. For example, you’ll pay an initial charge of 5% and an ongoing fee of 1.67%. By going through Hargreaves Lansdown, you can get this down to 0.92%.

    Other top UK mutual investment funds to consider include:

    • ASI Global Smaller Companies: Gain exposure to small-cap stocks operating in the UK
    • MI Chelverton UK Equity Growth Fund: This mutual fund will focus on AIM-listed companies

    Your capital is at risk.

    Best Exchange Traded Investment Funds

    Exchange-traded funds (ETFs) are highly sought after by UK investors. Put simply, they allow you to invest in an asset, or group of assets, in a cost-effective and convenient manner. In fact, a single investment is all that is required when using an FCA broker that supports this asset class.

    In terms of the best ETF investment fund available in the UK, we would argue that the Vanguard S&P 500 stands out from the crowd. You can find out more about this particular ETF towards the top of this page. If you’re looking to consider other ETF investment funds, check out our selections listed below.

    iShares FTSE 100 UCITS ETF  – Track the FTSE 100 Like-for-Like

    This particular ETF investment fund is arguably the best option in the market if you are looking to track the FTSE 100. For those unaware, this is the UK’s primary index and it consists of the 100 largest firms active on the London Stock Exchange.

    iShares FTSE 100 UCITS ETF

    Like most stock market indexes, the FTSE 100 is weighted based on market capitalisation. That is to say, FTSE companies with a higher valuation will contribute a larger percentage to the index. This means that firms like AstraZeneca and British American tobacco will lead the way.

    If the FTSE 100 interests you, there are heaps of ETF providers that track this index. However, leading fund provider iShares pips it for us. Crucially, you can back this ETF at eToro without paying any dealing charges or ongoing fees. Furthermore, the minimum investment stands at just $50 – which is about £40.

    Other exchange-traded investment funds to consider include:

    • SPDR Gold ETF: This ETF allows you to invest in the future value of gold without you needing to take ownership.
    • China 25 Index ETF: As the name suggests, this ETF allows you to track 25 large-cap companies operating in China. You can invest in this ETF – as well as the SPDR Gold, commission-free at eToro.

    75% of retail investor accounts lose money when trading CFDs with this provider

    Best ISA Investment Funds

    There isn’t an ‘ISA Investment Fund’ per-say, as most fund types can be added to your Stocks and Shares ISA account. In other words, an ISA is simply a tax-efficient account that allows you to avoid paying capital gains on the first £20,000 that you invest.

    This allowance is reset each and every year, meaning that ISAs are a must for all UK investors. In terms of eligible investment funds – this includes everything from ETFs, index funds, mutual funds, and investment trusts. Crucially, each and every investment fund that you find on this page can be added to your ISA account.

    However, you do need to ensure that your chosen broker offers ISAs. Both Hargreaves Lansdown and IG do – which are two of the leading FCA-regulated brokers that are suited for UK investors of all skill levels.

    Best Pension Investment Funds

    Looking to invest money into the financial markets as a way to save your golden years? If so, there are many investment funds that cater specifically for this goal. There are a lot of similarities between pension investment funds. For example, most will consist of a blend of stocks and bonds.

    If you are several decades away from your planned retirement age, then most of your basket will be held in the former. This is because stocks offer greater returns than bonds, albeit, the risks are higher. As you inch closer to your retirement age, you’ll find that most of your basket centres on high-grade bonds.

    Nevertheless, below you will find a selection of the best pension investment funds available to UK residents.

    Vanguard Target Retirement (Various Durations)

    Leading fund provider Vanguard offers heaps of retirement funds. Each fund comes with a different target retirement date – ranging from 2025 right up to 2065. Each target date will offer a different split between stocks and bonds – which as noted above, is more weighted towards the former the further you are retirement.

    Vanguard Retirement Fund Timeframes

    To give you an idea of what you will be investing in, the 2065 target date initially has 79% in stocks and 21% in bonds. The fund is highly diversified across most sectors and marketplaces. This includes stocks and bonds in the UK and overseas.

    The best way to access a pension investment fund offered by Vanguard is to go directly with the provider. In doing so, you’ll able to set up a monthly direct debit from just £100. While this might not sound like a lot, this can build up to a substantial pot over the course of many years.

    • Aditya Birla Sun Life Tax Relief 96: This pension investment fund focuses on long-term growth stocks. There is a 3-year lock-in period, so do bear this in mind.
    • ICICI Prudential Bluechip Fund: This is a pension investment fund for conservative investors. The fund will focus on high-grade blue chip stocks.

    Your capital is at risk.

    What Are Investment Funds?

    The term ‘Investment Fund’ can refer to several different asset classes. This covers ETFs, mutual funds, investment trusts, and index funds. With that said, each of the aforementioned investment avenues is very similar in nature. For example, all investment funds allow you to gain exposure to the financial markets in a 100% passive nature.

    This is because once an investment is made, the fund provider will buy and sell assets on your behalf. Therefore, there is nothing else you to do until you decide to cash your investment out. Secondly, all investment fund types are a good option if you are a complete novice. After all, you won’t need to make investment-based decisions – such as which stocks to buy or when to sell.

    What Are Investment Funds?

    The great thing about investment funds is that you can choose one that meets your long-term investing goals. For example, if you simply want to gain exposure to the UK stock market, then you’ll likely be suited for an ETF fund that tracks the FTSE 100. Or, if you want to save your golden years, you might consider one of the retirement investment funds offered by Vanguard.

    When it comes to fees, most investment funds come with an ongoing maintenance charge. This is expressed as a percentage and multiplied by the size of your investment. In a lot of cases, this will amount to less than 1% annually. You do, however, need to look out for a range of other fees that the fund provider might charge. For example, some will charge a performance fee – meaning that the fund will keep a percentage of any profits it makes for you.

    Types of Investment Funds

    As we have discussed throughout this page, there are many different types of investment funds. The one that you opt for will ultimately depend on what your long-term objectives are.

    This includes:

    • ETFs: ETFs will track a specific marketplace – like the FTSE 100 or Dow Jones. They can also track specific niche of the financial arena – such as dividend stocks or corporate bonds. ETFs are by far the most cost-effective type of investment fund available to UK residents.
    • Mutual Funds: Mutual funds are actively managed. This means that unlike ETFs, the fund manager will determine which stocks to buy and sell – and when. Because of this, you should expect to pay a higher ongoing charge.
    • Retirement Funds: This type of investment fund allows you to save your retirement. In most cases, this will come in the form of a mutual fund.
    • Investment Trusts: Investment trusts operate much the same as mutual funds, insofar that the trust is actively managed. However, the key difference is that investment trusts are closed-ended, and mutual funds are open-ended.
    • Index Fund: This particular investment fund type will simply look to track a stock market index. This might include the FTSE 100, NASDAQ 100, or S&P 500. The easiest and cheapest way to invest in an index fund is via an ETF.

    In most cases, you will need to invest in your chosen investment fund with an online broker that is licensed by the FCA. With that said, the likes of Vanguard allow you to invest directly on its website.

    Investment Trusts vs Funds

    As noted above, trusts and funds are virtually like-for-like when it comes to the end-to-end investment process. The reason for this is that both avenues allow you to invest on a passive basis and require no knowledge of the financial markets.

    With that said, investment trusts are typically a lot more cost-effective in comparison to their mutual fund counterparts. Furthermore, a recent study compiled by FCA broker Interactive Investor showed that investment trusts have generally outperformed mutual funds over the past decade.

    We should also note that investment trusts have more leeway when it comes to investing with borrowed funds. When the markets are performing well, this can result in amplified gains. Of course, this can and will have the opposite effect during bearish cycles.

    Benefits of Investing in Investment Funds

    Below you will find a quickfire list of benefits associated with investment funds.

    • Passive: All investment funds allow you to invest passively. You simply need to determine how much you wish to inject into the fund, and the provider will take care of the rest.
    • Perfect for Newbies: By investing in a fund, you no longer need to worry about stock market research and analysis. On the contrary, this role is reserved exclusively for the investment fund provider.
    • Low Minimums: Recognising that investment funds are particularly attractive to newbies, you will often find that account minimums are low. In most cases, an investment of just £100 is enough to give you access to the fund.
    • Low Fees: Leading investment fund providers like Vanguard and iShares rarely charge more than 1%. This offers great value when you factor in the work that goes on behind the scenes.
    • Instant Diversification: Most investment funds will contain dozens of stocks or bonds. Some contain hundreds or even thousands. Crucially, this ensures that you are able to create a highly diversified portfolio of assets with minimal effort.
    • Highly Liquid: This particular benefit isn’t the case with all investment trusts, as some install minimum lock-up periods (especially retirement funds). However, most investment funds allow you to cash in your position at any given time during standard market hours.

    How to Choose Investment Funds UK

    Make no mistake about it – there are thousands of investment funds available to UK residents. While variety is always a good thing, such an oversaturated market can make it challenging to pick a fund that meets your needs. With this in mind, below you will find a list of considerations that you need to make when choosing an investment fund.

    • The Objective of the Fund: First and foremost, you need to assess the overarching objective of the investment fund. For example, is the fund looking to outperform the FTSE 100, or is more focused on investing in high-grade bonds?
    • Asset Allocation: You then need to explore what assets the investment fund is currently holding. You can view this information easily by heading over to the provider’s website. You can also see the specific percentage that each asset contributes to the fund.
    • Minimum Investment: When going direct with the fund, you will need to meet a minimum investment requirement. This is also the case when using an FCA broker. In most cases, online brokers allow you to invest a lower amount than what is asked for by the fund provider.
    • Fees: You need to pay particular attention to the fees charged by the investment fund. In most cases, the fund will charge an ongoing maintenance fee. As covered earlier, some investment funds also charge a performance fee and/or initial fee. All fees are percentage-based on multiplied against the size of your investment.
    • Past Performance: The best way to gauge the performance of the investment fund is to look at historical returns. It’s a good idea to look at several timeframes – for example, the annual returns over the past 10, 5, and 3 years. For a closer snapshot, look at how the fund has performed against the wider markets over the past 12 months.
    • Reputation: You should also evaluate the reputation of the financial institution behind the investment fund. For example, the likes of Vanguard and iShares need no introduction – as these are both heavyweights in the global investment arena. However, some investment funds are managed by less small entities that are yet to truly make a name for themselves.

    If you are struggling to pick a single investment trust, then it might be worth considering a diversification strategy. For example, eToro allows you to invest in funds from just $50 each. As such, a $500 investment would allow you to invest across 10 different funds – all on a commission and maintenance fee-free basis.

    Best Investment Fund Brokers

    Once you have determined the type of investment fund that you wish to gain exposure to, you then need to start thinking about your choice of platform. While some fund providers allow you to invest directly, you’ll likely find that using a third-party broker is more cost-effective. Similarly, brokers often ask for a much lower investment amount.

    To help point you in the right direction, below you will find a selection of FCA brokers that allow you to invest in or trade investment funds.

    1. eToro - World Leading Investment Fund Platform with 0% Commission

    eToro is an FCA-regulated trading platform that offers thousands of financial instruments. On top of a 1,700+ stock library - alongside heaps of CFDs and cryptocurrencies, you can also invest in funds. In particular, eToro is strong in the ETF department. The platform offers ETFs on over 150+ marketplaces - all on a commission-free basis.

    Not only does this include fee-free buy and sell orders, but there is no ongoing charge. This means that you can invest in ETF funds in a super-competitive basis. Furthermore, eToro is suited for those of you that wish to invest with small amounts. This is because the minimum investment amount on funds is just $50 - or £40-ish.

    As noted earlier, this allows you to create a diversified basket of funds with ease. eToro is also a great option if you have no experience in investing online. This is because the platform is tailored to the 'novice' trader, which is evident in the ease in which you can get started.

    You simply need to open an account by providing some personal information, and then meet a small $200 minimum deposit. You can this instantly by using a UK debit/credit card or e-wallet (Paypal, Skrill, or Neteller). The only fees that you need to be made aware of is a 0.5% currency conversion charge and $5 withdrawal fee.

    Our Rating

    • Trade assets commission-free
    • Regulated in the UK by FCA
    • Social trading tools
    • User-friendly trading platform
    • 0.5% currency conversion fee on deposits
    75% of retail investor accounts lose money when trading CFDs with this provider.

    2. Plus500 - Low Cost Fund CFD Broker

    Plus500 is a good option for those of you that are looking to actively trade. This is because the CFD platform offers a variety of trading tools and features that go above and beyond the average broker. For example, you will have the option of going long or short on your chosen investment fund CFD.

    This means that you can short-sell the fund if you think it will go down in value, or place a buy order if you think the opposite. Additionally, Plus500 allows you to apply leverage when trade CFDs. This comes with the benefit of being able to trade with more than you have in your account.

    Much like eToro, Plus500 is a commission-free trading platform. You won't be charged anything to deposit or withdraw funds, either. You can get started with a deposit of just £100, which you can fund instantly with a debit/credit card or Paypal. Plus500 is licensed by the FCA.

    Our Rating

    • No withdrawal fees
    • 0% trading commission
    • FCA regulated
    • No educational material
    80.5% of retail investor accounts lose money when trading CFDs with this provider.

    3. IG - Established Broker With 17,000+ Markets and ISA Accounts

    IG is a well-known UK brokerage house that offers thousands upon thousands of market. This includes traditional stocks, CFDs, and even spread betting. In the case of the investment funds, IG covers most bases. You can invest in ETFs, index funds, mutual funds, and even investment trusts.

    ISAs are also supported, so you can invest in a super tax-efficient manner. In terms of fees, this will vary depending on the fund that you opt for. You can also 'trade' investment funds at IG in the form of CFDs. As we covered earlier with Plus500, this means that you can apply leverage and choose from a buy or sell order on each market.

    IG allows you to trade online, via MT4, or through its very own mobile app. Launched way back in 1974, the platform has a great reputation in the UK. It is licensed by the FCA (alongside several other bodies) and is itself publicly -listed on the London Stock Exchange. Minimum deposits start at £250, and debit/credit cards are accepted.

    Our Rating

    • Spreads from 0.6 pips
    • Supports MT4 trading platform
    • Excellent research department
    • 1% fee when using Visa and 0.5% via MasterCard
    • Spreads on some crypto pairs are somewhat expensive
    There is no guarantee you will make money with this provider.

    4. Hargreaves Lansdown - Huge Variety of Investment Funds

    Hargreaves Lansdown is a direct competitor of IG. The platform has a trusted reputation in the UK and heavily regulated. It offers thousands of assets including heaps of investment funds. This covers all types - such as ETFs, mutual funds, and investment trusts.

    On top of a huge library of funds to choose from, we like that Hargreaves Lansdown allows you to invest with small stakes. For example, most funds come with a £100 minimum - or £25 per month via direct debit. Furthermore, Hargreaves offers fully-fledged ISA accounts.

    An additional stand-out feature at Hargreaves Lansdown is that you will have access to UK-listed IPOs. Very few online brokers offer this. In terms of deposits and withdrawals - no fees apply. You can choose from a UK debit card or bank transfer. The platform is licensed by the FCA and your funds are protected by the FSCS.

    • Trusted name in the UK brokerage scene
    • Heaps of index funds, stocks, ETFs, and more
    • Invest from just £100
    • More expensive than other UK brokers in the space
    Your capital is at risk.

    5. Capital.com - User-Friendly Trading Platform With £20 Minimum

    If you like the sound of trading investment funds via CFDs, an additional option on the table is Capital.com. The platform is very user-friendly, which is great if you will be trading online for the first time. To complement the ease in which you can trade, Capital.com allows you to get started with a minimum deposit of just £20.

    You can do this with your everyday debit/credit card or e-wallet. All markets at Capital.com come with the option of going long and short, as are leverage facilities. There are no trading commissions either, and all deposits/withdrawals are fee-free. The platform can be accessed online or via the Capital.com app.

    Our Rating

    • Get started with just £20
    • No commissions and tight spreads
    • Great for newbies
    • Minimum £250 deposit when using a bank transfer
    72.6% of retail investor accounts lose money when trading CFDs with this provider.

    How to Invest in Investment Funds

    We are now going to show you how you can get started with an investment fund from the comfort of your home. While there are many brokers active in this space, we have decided to walk you through the steps with FCA-regulated eToro. This is because you will be able to invest from just $50 in your chosen fund, and there are no ongoing charges to contend with.

    Step 1: Open an Investment Account

    eToro sign up

    Head over to the eToro website to open an account. The registration process takes a matter of minutes and simply requires some personal information and contact details.

    If you want to use the eToro investment app, you can download it for free from the Apple App Store of Google Play Store, or why not check out our review of the best investment app for the UK.

    Step 2: Upload ID

    You will need to have your account verified before a withdrawal can be made. As such, it’s best to get it out of the way right now. All you need to do is upload a copy of your passport/driver’s license and a recently issued bank account statement or utility bill.

    Note: If you don’t have the above documents to hand, eToro still allows you to deposit up to $2,250. 

    Step 3: Deposit Funds

    When it comes to making a deposit, you can do this instantly with a debit/credit card or e-wallet. The latter includes Paypal, Skrill, and Neteller. You can also deposit funds by making a transfer from your bank account, but it can take several days for the funds to arrive.

    The minimum is $200 and you will incur a 0.5% currency conversion fee when using a UK payment method.

    Step 4: Invest in an Investment Fund

    As long as you opted for an instantly-processed payment method, you can now invest in your chosen fund. The easiest way to do this is to search for the name of the fund and click on the result that loads up (like the below).

    Invest in investment funds at eToro

    You will then need to click on the ‘Trade’ button.

    Invest in investment funds at eToro

    Finally, enter the amount that you wish to invest in US dollars and confirm the trade. And that’s it – you’ve just invested in an investment fund without paying any commission!

    Invest in investment funds at eToro

    Conclusion

    In summary, there are thousands of investment funds for you to choose from as a UK investor. Whether that’s in the form of an ETF, mutual fund, index fund, or investment trust – there is an option to suit all financial aims and objective.  Regardless of the fund that you decide to invest in, you will benefit from a passive income stream which in most cases – will cost you less than 1% in annual fees.

    With that said, FCA broker eToro allows you to invest in over 150+ funds on a commission-free basis – with no ongoing maintenance fees to contend with. You can get started with a pre-fund investment of just $50, too – which is great if you want to start off with small stakes.

    eToro: Best Investment Fund Broker with 0% Commission

    Our Rating

    etoro logo
    • Invest in investment funds with zero commission
    • Wide range of funds
    • Social trading network
    • Copy trading tools
    • FCA regulated broker
    etoro logo
    Your capital is at risk.

    FAQs

    What are alternative investment funds?

    As the name implies, an alternative investment fund will buy and sell 'alternative; assets. This is essentially anything that sits outside of the traditional stock/bond/cash arenas. Examples include real estate, commodities like oil or gold, and even startups.

    How much do investment funds cost?

    Investment funds typically charge an annual maintenance fee. In most cases, this is less than 1% - but can be much more depending on the provider.

    When can you withdraw money from an investment fund?

    In most cases, you can cash out an investment fund at any given time during market hours. There are, however, exceptions to the rule - as some providers have a minimum redemption period. Always check this before investing.

    How much do you need to invest in an investment fund?

    Once again, this will vary depending on the platform that you invest with. For example, eToro has a minimum investment of $50 (£40-ish) and Hargreaves Lansdown requires a lump sum of £100 or £25 per month.

    Can investment funds lose money?

    Absolutely. After all, there is no guarantee that your chosen fund will generate a return for you - so always consider the risks before investing.

    Can you invest directly with an investment fund provider?

    In some cases, yes. Large-scale providers like Vanguard allow a direct investment - but the minimum deposit is set at £500. This is why it's often better to invest via a third-party broker that is FCA-regulated.

    Can you short-sell an investment fund?

    There are many CFD platforms in the UK space that allow you to short-sell funds. In most cases, this will either come in the form of an ETF or index fund.

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    Kane Pepi

    Kane holds academic qualifications in the finance and financial investigation fields. With a passion for all-things finance, he currently writes for a number of online publications.