The ultimate tracker fund portfolio to grow your savings

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This is the second part of a series on how to invest just using passive funds. The first part looked at 

building an income portfolio and the final part will look at a defensive portfolio.

Passive funds take human stock-picking – and its high trading costs and behavioural pitfalls – out of the investment process by buying and holding huge swathes of the stock markets for rock-bottom fees.   

The rise of passive investing is one of the most powerful trends in investment, with £1 in every £3 is now invested in a passive fund in Britain, according to Calastone, a group which tracks fund flows. 

But picking the right passive funds is no walk in the park. There are hundreds available, all tracking different types of markets and charging different prices. We asked wealth managers to design their ultimate “growth” portfolio, which aims to deliver high returns for investors willing to take on more risk, using only passive funds.

Stocks offer the biggest opportunity to make money over long periods of time because there is no limit on how big a company can grow. On the other hand, bonds pay out a fixed sum and are prized for delivering a regular income.   

This means that a portfolio geared for growth should hold mostly stocks, according to Brewin Dolphin, a wealth manager. 

John Moore, of Brewin Dolphin, said: “Around 90pc of your holdings should be in stocks, split between around 60pc in America, 15pc in Asia, 12.5pc in Europe, 10pc in Britain, and about 5pc in emerging markets.

A good starting point, according to James McManus of wealth manager Nutmeg, is a global stocks tracker, such as the UBS MSCI ACWI Socially Responsible Hedged to GBP Uctis ETF. It charges 0.48pc in fees. 

“This fund provides access to large and mid-sized stocks from 23 developed and 24 emerging markets that have outstanding ethical ratings, while excluding companies that have negative social or environmental impacts. It also hedges the effect of foreign currency movements between developed markets and the pound,” said Mr McManus.  

For technology stocks, which are some of the fastest-growing firms on the planet, Mr McManus recommended the Invesco EQQQ Nasdaq-100 Ucits ETF, which tracks the 100 largest stocks on America’s Nasdaq exchange for a 0.3pc fee.  

“It efficiently owns businesses that rely on technology but also includes those that sit outside of the traditional technology sector, such as Netflix and Amazon,” he said.   

Mr Moore added that investors could also own some “thematic” funds, which buy companies that are involved in specific business areas.  

He said one option was the Legal & General Hydrogen Economy Ucits ETF, which owns companies that use hydrogen to make energy and charges 0.49pc. Another was the Rize Sustainable Future of Food Ucits ETF, which buys companies that are innovating in the food industry and charges 0.45pc.     

Another area which growth investors should look at is domestic Chinese companies because the economy is growing rapidly, according to Mr Moore. He said one option was the iShares MSCI China A Ucits ETF, which charges 0.4pc.