The Best FTSE 250 ETF to Watch
Whilst the better known FTSE 100 is a stock index which tracks the 100 largest companies listed on the London Stock Exchange (LSE), the FTSE 250 tracks the next 250 largest companies (i.e. 101st – 350th).
One of the most popular and most accessible ways of gaining exposure to this mid-cap index is by using FTSE 250 ETFs (Exchange-Traded Funds). But what is the best FTSE 250 ETF to watch in 2024? In this article, we compare 3 options for those looking for a FTSE 250 tracker fund.
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How to Pick the Best FTSE 250 Tracker ETF
FTSE 250 ETFs attempt to mirror the performance of the overall index by using investor capital to buy shares in all 250 of the companies which make up the index.
Consequently, in terms of performance, there does not tend to be an enormous amount of difference between each FTSE 250 tracker ETF, as, in theory, each ETF should contain exactly the same investments.
However, as well as the reputation of the ETF provider, there are a number of things to consider when looking for the best FTSE 250 ETF, including:
- Fees: ETFs charge investors an annual fee to cover the fund management. Generally speaking, ETFs which passively track a stock index charge fairly low fees, as the fund simply mimics its underlying index. However, fees do vary depending on the provider and, as these are charged annually, they can add up over time.
- Liquidity: Regardless of what instrument you’re trading or investing in, higher liquidity is always preferable, but its importance is generally more significant for those operating over a shorter time horizon. The higher an asset’s liquidity, the easier and quicker it is to buy and sell, ensuring that neither buyers nor sellers have to wait long to find a counterparty to their transaction. Higher liquidity also results in lower spreads, the difference between an asset’s buy and sell price.
- Tracking Accuracy: Although every FTSE 250 tracker fund is designed to track the FTSE 250, they may not all achieve the same level of accuracy in doing so. Consequently, it might be worth checking how accurately the ETF has managed to track the index historically.
Best FTSE 250 ETF to Watch in 2024
So, now we know some of the things to consider when picking the best FTSE 250 ETF, what are some examples of the options available to investors in 2024?
Vanguard FTSE 250 UCITS ETF
The Vanguard Group is an investment firm, which was founded by Jack C. Bogle, the man credited with popularising the index fund. It is the largest provider of mutual funds in the world and the second-largest provider of ETFs in the world, in terms of assets under management.
The Vanguard FTSE 250 UCITS ETF is the largest FTSE 250 tracker ETF, with £2.2 billion of assets under management as of 31 July 2024. It’s also the cheapest, with an annual fee of just 0.10%.
In the year ending 30 June 2023, Vanguard reported a tracking error of 0.07%, where tracking error measures the volatility of the difference in return between the fund and the benchmark index.
iShares FTSE 250 UCITS ETF
iShares is a brand of ETFs which are managed by BlackRock. BlackRock is the second largest provider of mutual funds in the world and the largest provider of ETFs, in terms of assets under management.
The iShares FTSE 250 UCITS ETF is smaller than its Vanguard equivalent, with around £830 million of assets under management as of 15 August 2024. It’s also considerably more expensive, with an annual fee of 0.40%.
However, at the time of writing, this ETF has had significantly higher trading volume than the Vanguard FTSE 250 ETF over the past year, which would suggest that it has enjoyed higher liquidity. In the year ended 29 February 2024, the ETF also reported a tracking error of 0.07%.
HSBC FTSE 250 UCITS ETF
The HSBC FTSE 250 UCITS ETF is by far the smallest of the three FTSE 250 ETFs highlighted in this article, with just £50 million of assets under management as of 30 June 2024. In terms of fees, this FTSE 250 ETF charges an annual fee of 0.35%.
Its trading volume is also significantly lower than the other two FTSE 250 tracker funds highlighted, meaning it doesn’t enjoy as high liquidity. Over the last three years, the ETF has reported a tracking error of 0.06%.
How to Invest in a FTSE 250 Tracker Fund
With an investing account from Admiral Markets, you can invest in both the Vanguard and iShares FTSE 250 tracker funds highlighted in this article by following these steps:
- Open an Invest.MT5 account and log in to the Dashboard
- Open the web trading platform
- Search for a FTSE 250 ETF and click the symbol to open a price chart
- Press ‘Create New Order’, enter the number of shares you want to buy and hit ‘Buy’ to send the order to the market.
Investing with Admiral Markets
With an Invest.MT5 account, you can invest in FTSE 250 tracker funds as well as over 300 other ETFs and more than 4,500 stocks from around the world! Click the banner below to find out more about investing with Admiral Markets:
FAQ – FTSE 250 Tracker Funds
What is the cheapest FTSE 250 tracker?
The Vanguard FTSE 250 ETF is the cheapest FTSE 250 tracker ETF available to investors, with an annual charge of just 0.1%.
What is the average annual return of the FTSE 250?
The FTSE 250 has a five year annualised return of 4.6% at the time of writing.
Is FTSE 250 ETF a good investment?
The answer to this question depends on the individual investor and what they are trying to achieve from their investment. The FTSE 250 tracks 250 mid-cap, mostly domestically focused, companies from the UK. Consequently, for investors feeling bullish on the long-term prospects of the UK economy, a FTSE 250 tracker could be a good option.
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