| Index Trackers | | | | stamp duty to pay and annual charges are low |
| There is a category of unit trusts called index | | | | (below 0.5%) They tend to be slightly cheaper |
| trackers, which are set up to match as far as | | | | than most index trackers. |
| possible a specific index, such as the FTSE 100, | | | | From experience to date, exchange traded funds |
| the FTSE all share, the US, Europe or Japan | | | | seem to track better than traditional index funds, |
| indices. | | | | possibly because of the lower charges and |
| | | | reduced internal tax liabilities arising from the way |
| Charges are lower than ordinary unit trusts | | | | they operate. |
| because expert advisers are not needed. Initial | | | | Friendly Society Savings Schemes |
| charges are usually no more than 1%. | | | | A friendly society is a mutual insurance and |
| Some investment trusts offer index loan stocks, | | | | savings organisation operating for the benefit of |
| which are directly linked to the relevant index and | | | | its members. Usually it has arrangements for |
| so can achieve perfect linking. They usually have a | | | | sickness and death benefits as well as other |
| set repayment date and pay dividends. As they | | | | forms of insurance and investment. |
| are unsecured, there is a slight risk of a failure to | | | | Friendly societies are authorised to offer a tax |
| repay, but they take preference over shares in | | | | free investment linked to their life assurance |
| the investment trust. | | | | funds. The maximum investment is £25 a |
| Index trackers are a relatively cheap and safe | | | | month or £270 a year and schemes run |
| way of investing in the stock market. | | | | for a minimum of ten years. |
| Exchange traded funds | | | | There has to be a life assurance element, the |
| Recently introduced in the UK, these index | | | | cost of which has a slight adverse impact on |
| trackers (also called extraMARK or iShares) are | | | | returns. |
| different from an investment trust in that they | | | | Income in the scheme is subject to a favourable |
| are open ended (like an OIEC) and different from | | | | rate of tax and capital gains are tax free. After |
| a unit trust in that the price varies during the day | | | | ten years no tax is payable on withdrawal. There |
| with the movement of the underlying assets | | | | are penalties for early withdrawal. |
| whereas unit trust prices are revised only once a | | | | Watch out for proportionally high charges because |
| day. | | | | the amounts invested are small. |
| There is not a great deal of choice so far, but if | | | | These schemes are often promoted for children. |
| they catch on there will be many more. In addition | | | | They are a way of involving children's savings in |
| to the FTSE 100 and FTSE ex UK, there are | | | | equities but most children are in a tax free |
| iShares for specific categories, such as TNIT | | | | position anyway, so other alternatives should be |
| (technology, media and telecom). | | | | considered. |
| Dealing is through a stockbroker. There is no | | | | |