Tracker Funds

Whilst not part of his own investment methods

"risk comes from not knowing what you are doing"

"diversification is a protection against ignorance; it makes very little sense to those who know what they are doing."

Warren Buffett does recognise the advantages of index-trackers:

Advises his wife to invest her inheritance in index-trackers after he dies

March 2014 - widely reported

As part of the 49th Berkshire Hathaway annual report that came out earlier this month, Warren Buffett wrote that he has given instructions to his wife/long-time partner Astrid Menks on what she should do with the money she inherits when he dies.
One might think that the instruction might get quite complicated since she'll be inheriting money from one of the richest men in the world.
The truth is the advice is quite simple.
Warren Buffett wants his partner to invest 90% of her inheritance into a low-cost S&P 500 index tracker. He also advised that she should invest the remaining 10% into short-term government bonds. That's it. Nothing fancy.

And his advice has been consistent:

1993

"By periodically investing in an index fund, the know nothing investor can actually out perform most investment professionals. Paradoxically, when 'dumb' money acknowledges its limitations, it ceases to be dumb."

1996

"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals."

2007

"A very low cost index is going to beat a majority of the amateur managed money or professionally managed money. The gross performance [of a hedge fund] may be reasonably decent, but the fees will eat up a significant percentage of the returns. You'll pay lots of fees to people who do well, and lots of fees to people who do not do so well."

Bet $1million that index-tracker fund will outperform hedge-funds over 10-years

reported in Daily Telegraph 04 February 2015, by Richard Evans

The cheap tracker funds that anyone can buy will make you more money than hedge funds available only to the seriously wealthy, according to Warren Buffett.
And the world's most famous investor has put his money where his mouth is.
In 2008 he entered into a bet with an American asset management firm that the main US stock market index, the S&P 500, would outperform a group of five hedge funds over a 10-year period.
The results of the seventh year of the bet have just been announced - and Mr Buffett, and the humble index tracking fund, are decisively in the lead.
In 2014 the S&P 500 tracker fund chosen to represent the index in the bet rose by 13.6pc. The average gain for the hedge funds was just 5.6pc, according to Fortune magazine, which has been monitoring the bet annually.
Since the bet was taken out, the index fund has risen by 63.5pc. The hedge funds, which were picked by Protege Partners, a New York money manager, are up by about 20pc (the exact figure is not known because not all the hedge funds have yet reported their figures).
The tracker has beaten the hedge funds in each of the past six years. Only in the first year of the bet did the hedge funds 'win', falling by 24pc amid the turmoil of the financial crisis against 37pc for the tracker.
Whoever loses the bet at the end of the 10 years has to pay at least $1m to a charity chosen by the winner.
Even the hedge fund champions now concede that Mr Buffett is likely to win the wager, saying that only a severe fall in the stock market could see the hedge funds back in the running.

reported in www.moneyobserver.com 04 January 2018, by Kyle Caldwell

Warren Buffett comfortably won the wager. The tracker fund he chose, a low-cost Vanguard S&P 500 index fund, delivered an annual average return of 7.1pc. In contrast the basket of hedge funds selected by Protege Partners produced an annual average return of 2.2pc.
Protege Partners paid $2.2million to a girls charity selected by Mr Buffett, the wager money had grown, it had been invested in Berkshire B shares in 2012.

It seems buying an index-tracker ISA direct from the provider is increasingly phased out and replaced by buying via a fund platform.
Using a fund platform adds an additional annual charge though this may be offset by lower fund charges negotiated by the platform provider.

Websites which compare platform charges:

thisismoney and go to the DIY INVESTING ISA CHARGES table near the top of the page.

monevator maintained by investment enthusiasts.
Monevator has lots on Passive Investing (passive investing is another name for investing in index-tracker funds).
Easier reading, lighter style than this page.

comparefundplatforms another calculator from Candid Money.

Vanguard 'what we offer', index and active funds enquiry. Good information, easy to use, designed for a UK audience.
You do not need to be a Vanguard customer to use the enquiry.
Vanguard platform only covers Vanguard funds.
Vanguard platform has the lowest admin charge(0.15%) and Vanguard index funds have low annual charges.

BlackRock UK Investment funds for individuals - from about 170 index (passive) funds. Good search tool with good performance data shown on the first page.

Fidelity UK Investment finder - from about 180 index (passive) funds. Helpful search tool backed by good performance data.

Legal & General In 2021 Legal & General transferred administration of its personal investing business to Fidelity.

HSBC UK Online fund platform.

Hargreaves Lansdown Search index tracker funds enquiry. Good information, easy to use, designed for a UK audience.
You do not need to be a Hargreaves Lansdown customer to use the enquiry.

Number of indices upon which index-tracker funds can be benchmarked has increased over the years.
Some indexes have become very specialised. Best to stick with indexes from major providers such as FTSE, MSCI, S&P, and look for funds with at least five years past performance figures.