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Our pick of the 10 best ETFs for passive investors who want low-cost funds

3. SPDR S&P UK Dividend Aristocrats

The British stock market is one of the best in the world for dividends and this ETF aims to exploit this for income investors. It follows an S&P index that includes 39 companies. However, stocks must have increased or maintained dividends for at least seven years. This offers some protection from potential dividend cuts. It has a good record of matching market returns while yielding 4.1pc.

Ongoing charge: 0.3pc a year

4. Vanguard FTSE 250

This fund gives investors a chance to own Britain’s smaller but often faster-growing companies at a fraction of the cost of actively managed funds. It tracks the FTSE 250 index and has a great performance record, while its £2.6bn size means it is easy to trade.

Ongoing charge: 0.1pc a year

5. iShares Core S&P 500

This is the biggest ETF listed on the London market, with nearly £29bn in assets. The fund mimics the S&P 500 index, which covers around 80pc of the American stock market. 

Ms Hutchinson said the fund tended to return more than the index, thanks to tax arrangements. Because of its size it is incredibly cheap to own – it costs just 7p a year for every £100 invested.

Ongoing charge: 0.07pc a year

6. HSBC MSCI World

This is one of the cheapest ways for investors to get broad exposure to more than 1,500 companies across 23 different countries. It has more than £1bn in assets and is easy to buy. The fund is also very good at tracking the MSCI World index and occasionally returns more than the benchmark.

The fund excludes stocks involved in selling weapons banned by international treaties.

Ongoing charge: 0.15pc a year

7. SPDR S&P Global Dividend Aristocrats

Like its peer for British companies, this ETF owns stocks that have grown dividends in a sustainable and consistent way. Its criteria are stricter, with stocks having to show a 10-year record. 

The fund currently owns 98 companies and can choose from more than 46 countries. It yields 3.5pc but has returned less than the vanilla MSCI World index, owing to a lower allocation to the American market.

Ongoing charge: 0.45pc a year

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