Archived article: Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Passive investing has grown in popularity in recent years due to its strong performance, ease in diversification and (typically) lower fees than active options.
These funds track a specific stock index, such as the FTSE 100 or S&P 500. You can usually choose to invest in passive funds either through an exchange-traded fund (ETF) or a more traditional tracker fund .
There’s not necessarily a better option between the two, and a lot of it comes down to preference. The main difference is that ETFs are repriced throughout the day in market hours while UCITS funds will have one price per day. ETFs also publish the underlying investments each day, but if you’re investing in a passive fund, you'll need to look at the index itself to get an idea of what you’re holding.
Different investment companies will offer their own versions of funds which track the same index. Because they are all attempting to follow the performance of the same index, the performance between these funds should be relatively similar. But they may have different fees or have tracking differences, depending on how the company goes about investing. It’s worth having a look at a few different options to make sure you’re choosing the best value option.
The most popular indices for AJ Bell investors, via tracker funds, were the S&P 500 and FTSE All World. Other indices heavily featured in the most popular funds are listed below.
The most popular indices tracked by AJ Bell DIY investors this year
| Index | Five-year total return |
|---|---|
| S&P 500 | 116.9% |
| FTSE All World | 94.6% |
| FTSE 100 | 109.4% |
| MSCI World | 103% |
| FTSE All World Technology Index | 176.5% |
| NASDAQ 100 | 139.5% |
| FTSE Developed Europe ex UK | 79.1% |
| MSCI Emerging Markets | 41% |
| FTSE 250 | 49.3% |
Source: AJ Bell. Indices featured in the most-bought passive funds from 1 January 2025 to 31 October 2025
The S&P 500
The S&P 500 was the most popular index to be tracked by AJ Bell customers, through funds including the Vanguard S&P 500 UCITS ETF, SPDR S&P 500 UCITS ETF and UBS S&P 500 index.
The index tracks the performance of 500 of the largest companies in the US by market cap, if they meet certain criteria. Companies are selected for the S&P 500 by a committee, which is mostly guided by market cap, but also has rules including the majority of the company shares being owned by the public and having at least a year since its IPO before being eligible for the index. It encompasses some of the hottest names on the market right now, such as Nvidia, Microsoft, and Alphabet.
The S&P 500 gives different weightings to the stocks it holds based on market cap and rebalances those weightings on a quarterly basis. For example, Nvidia at some points has represented over 8% of the S&P 500, even though it’s one of about 500 stocks. If they were all weighted equally, each stock would be worth 0.2% of the index. This might be a worry for some investors, because it means the performance of their index fund is heavily reliant on a single company.
The FTSE All World
The FTSE All World index includes companies from around the world, including both developed and emerging markets. To be eligible, the company must be considered either mid or large-cap. As of 30 September, it has 4,254 different holdings across 48 different countries. This index might appeal to investors who are looking through more diversity in their holdings than just a single country. However, it’s worth noting that the index still has a heavy weighting in many of the same names as the S&P 500. Nvidia accounts for 4.8% of the index, followed by Microsoft at 4.2%.
The most popular way to gain exposure to the FTSE All World among AJ Bell customers this year has been through the HSBC Index Tracker FTSE All World Index.
However, the FTSE All World is not the only way to gain global exposure. The MSCI World is another index with a similar aim but has slightly different criteria. Instead of both emerging and developed markets, it focuses just on developed markets, investing in 23 different countries. It has 1,320 different constituents, although its top holdings are similar to the FTSE All World. The MSCI world index has performed slightly ahead of the FTSE All World in the past five years, returning 103% to the FTSE All-World's 94.6%. AJ Bell DIY investors have most frequently gained exposure through the Fidelity Index World.
Putting a focus on tech
Many people use passive funds to invest in a specific country or region, but they can also be used to single out a theme or sector. There are indices designed for this type of investment, and recently, some of the most popular ones have been in tech. However, it’s important to understand before you start investing in these areas that there is a much heavier concentration risk. If all your investments are in the same sector, they will likely be vulnerable to similar market factors, causing a large amount of volatility compared to a broader index approach.
It also means that their exposure to a single company could be much larger. For example, the FTSE All-World Technology Index has 433 constituents, but the top ten stocks account for 68.6%, and all but two are based in the US. Its largest holding, Nvidia, accounts for 15.3% of the entire index. While this does create the potential for big returns if these companies do well, the risk is large.
The AI boom has persuaded many investors to put some of their investment towards it, most commonly through the L&G Global Technology Index Trust.
Hannah Williford: Content Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes...
