Our index funds often hold hundreds or even thousands of shares or bonds. Spreading your investments like this helps reduce your risk.
We offer our funds at low cost, helping you keep more of your returns.
You can access an entire market with one fund.
What is an index fund?
When Jack Bogle founded Vanguard in 1975 he pioneered a new way of investing – the index fund. Rather than relying on analysts and fund managers to pick individual shares or bonds they think are going to do well, index funds ‘track’ the overall performance of an entire market index, like the FTSE 100 or S&P 500. Or as Jack put it…
“Don't look for the needle in the haystack. Just buy the haystack!”
Founder of Vanguard
His idea was slow to catch on at first – but over time people have come to see how the power of the markets can deliver healthy long term returns.
And because they typically have lower fees you keep more of your returns, which can really add up in the long run. That’s why today people worldwide have invested £5 trillion in our index funds.*
How does an index fund work?
An index fund will often buy shares in every company listed on the index it’s tracking. So for example, a FTSE 100 index fund might buy shares in every company in the FTSE 100 – all 100 of them.
In practice, buying every single share or bond in an index isn’t always possible or cost effective. After all, some of the main global markets contain hundreds or even thousands of shares or bonds.
So sometimes the index fund might buy a representative sample of shares or bonds instead.
Important things you need to know before you invest
The aim of an index fund is to track the performance of a given index. It will do this if the index is going up or if it is going down, so you might get back less than you invested.
Index funds will track the market, they won’t beat it. If you’re prepared to take on more risk and higher fees to beat the market, an active fund might be more appropriate for you.
Our index funds invest in a variety of markets which carry specific risks. Please see the Key Investor Information Document for full details.
*Source: Vanguard, as at April 2023