The 7 Best ETFs to Invest in 2025

ETFs have emerged as one of the fastest-growing investment assets in recent years — and for good reason. They offer an easy, low-cost way to gain exposure to a wide range of markets, requiring minimal effort or specialist knowledge, while still delivering attractive long-term returns. Ultimately, their greatest strength lies in providing instant diversification through a single investment.

But with so many options available globally, how do you choose the best ETFs to invest in?

In this article, we’ll highlight some of the top exchange-traded funds to consider.

Best ETFs to invest in the UK in 2025

These are some of the best ETFs you can contract from the UK, ideal for building a solid portfolio without complications.

Vanguard S&P 500 UCITS ETF

We begin with a popular choice among UK investors: Vanguard S&P 500 UCITS ETF (VUSA). It offers broad exposure to the US market’s 500 biggest companies.

This exchange-traded fund provides direct exposure to the S&P 500 index, home to some of the world’s most powerful and innovative firms, such as Apple, Microsoft, and Amazon. It does so through a full physical replication strategy, meaning it actually holds the underlying shares of the index rather than using swaps or derivatives. This ensures transparency and accurate tracking.

What makes VUSA particularly compelling is its exceptionally low cost. With a total expense ratio of just 0.07% per year, it is one of the most affordable ways for European and UK investors to access the U.S. equity market. Over the last few years, the ETF has delivered strong returns, primarily thanks to the consistent earnings growth of its largest constituents.

VUSA distributes dividends on a quarterly basis, making it suitable for income-focused investors—though it also fits well within accumulation strategies, especially when held inside tax-efficient wrappers like ISAs or SIPPs.

Although priced and traded in GBP on the London Stock Exchange, the fund still tracks a USD-based index, meaning investors remain exposed to USD/GBP exchange rate fluctuations. However, this structure avoids the need for manual currency conversion, offering added convenience for UK-based investors.

The fund's historical drawdowns, such as those experienced in 2020, have typically been followed by robust recoveries—underscoring the S&P 500’s resilience over time. The index itself has a well-documented record of outperforming most active managers in the long run, and VUSA mirrors that performance with remarkable accuracy and efficiency.

This ETF fits naturally into a wide variety of investment strategies:

• As a core building block in a globally diversified portfolio
• As the U.S. equity allocation in a regional equity split
• Or even as a standalone vehicle for those seeking broad equity exposure with minimal hassle

VUSA is also a common component in established models like the Boglehead 3-Fund Portfolio, the Couch Potato, and risk-parity strategies such as All Weather.

In summary, the Vanguard S&P 500 UCITS ETF offers a clean, cost-effective, and robust way to gain exposure to the U.S. stock market. Its combination of high diversification, consistent performance, and investor-friendly pricing makes it an excellent choice for anyone committed to a long-term, index-based approach. For those following a passive strategy, it’s simply a matter of contributing regularly and rebalancing periodically—letting the market and time do the heavy lifting.

👉 Read here to learn how to invest in the S&P 500

Invesco EQQQ NASDAQ-100 UCITS ETF

From innovation to disruption, few segments of the market capture investor interest quite like technology. For those looking to gain exposure to the leading edge of global innovation, the NASDAQ-100 has long been the benchmark of choice.

The Invesco EQQQ NASDAQ-100 UCITS ETF (ticker: EQQQ), is a fund that tracks the performance of the 100 largest non-financial companies listed on the NASDAQ Stock Exchange. This includes well-known giants such as Apple, Microsoft, Nvidia, Amazon, and Alphabet—businesses that have helped reshape the global economy and consumer behaviour alike.

The ETF uses a full physical replication strategy, meaning it directly holds the underlying shares in the index. This ensures transparency and reduces counterparty risk compared to synthetic or derivative-based products. It is designed to give investors efficient and precise exposure to the fast-paced world of U.S. tech and growth companies.

What sets EQQQ apart is its focus on growth. The NASDAQ-100 is heavily tilted towards technology, communication services, and consumer discretionary sectors—areas that have significantly outperformed broader markets during periods of expansion and innovation cycles.

This ETF offers an opportunity to participate in that growth, albeit with a higher degree of volatility. The recent 3-year performance of nearly 25% annually (in GBP terms) is a reflection of the strength of its constituents—particularly the megacap tech names that have driven much of the market’s upward momentum.

EQQQ distributes dividends quarterly, though income is generally modest due to the growth-oriented nature of the underlying companies, many of which reinvest profits rather than pay them out. Investors may prefer to reinvest these payouts to benefit from compounding.

The ETF is traded in GBP on the London Stock Exchange, making it a practical choice for UK-based investors. However, as it tracks a USD-denominated index, returns are still affected by the USD/GBP exchange rate—a consideration for those seeking to manage currency exposure.

Given its sector bias and return profile, EQQQ can be a powerful addition to a long-term portfolio in several roles:

• As a growth-oriented satellite holding to complement broader market exposure
• As the core U.S. equity position for investors who want to lean into innovation
• Or as part of a thematic allocation focused on technology and disruption

It's particularly effective when paired with more conservative or value-oriented funds, helping to balance out performance across different market environments.

In summary, the Invesco EQQQ NASDAQ-100 UCITS ETF offers investors access to some of the most dynamic and influential companies in the world. While it carries higher volatility than a traditional index like the S&P 500, it also offers the potential for higher returns. For investors comfortable with these swings and focused on long-term capital growth, EQQQ stands out as a compelling option.

Those following an indexed approach can benefit from blending it with broader ETFs, while those with a tactical strategy may find EQQQ a useful tool for capturing upside during periods of technological leadership.

iShares Core FTSE 100 UCITS ETF

Shifting focus to the domestic market, the FTSE 100 represents the largest and most established companies listed on the London Stock Exchange—names that are woven into the fabric of the British economy and global commerce alike. For investors seeking exposure to these industry heavyweights, the iShares Core FTSE 100 UCITS ETF (ticker: ISF) offers a simple, low-cost route.

The ETF aims to replicate the performance of the FTSE 100 Index, which includes companies across energy, consumer goods, banking, healthcare, and mining. Well-known constituents include BP, HSBC, Unilever, and AstraZeneca. These firms are typically large, dividend-paying multinationals, giving this ETF a distinct income profile and geographic diversification—even within a UK-listed index.

ISF stands out for its reliability and stability, offering investors exposure to established blue-chip companies, many of which have a long track record of profitability and global reach. While the FTSE 100 is often viewed as more value-oriented compared to U.S. indices like the S&P 500 or NASDAQ-100, it brings balance to a global equity portfolio—particularly during periods when growth stocks underperform.

The ETF has also gained a reputation as a solid income generator, thanks to the higher-than-average dividends of many of its constituents. The combination of moderate capital growth and consistent payouts makes it an attractive option for those seeking long-term equity exposure without excessive volatility.

As a low-cost core holding, ISF is frequently used by investors looking to build a domestic allocation or complement international holdings. Its simple structure, deep liquidity, and wide availability across platforms make it easy to access and integrate into a range of investment strategies.

In summary, the iShares Core FTSE 100 UCITS ETF is a dependable choice for investors who want broad exposure to the UK’s largest listed companies. It offers a balance of income and growth at a minimal cost, making it suitable for both conservative and diversified equity portfolios.

For those looking to anchor their portfolio with UK equities, ISF provides a straightforward, cost-effective solution—no complexity, no frills, just a clear path to long-term market participation.

HSBC S&P 500 UCITS ETF USD

HSPX offers access to a broad range of sectors—from technology and healthcare to finance and consumer goods. Companies like Apple, Microsoft, Amazon, and JPMorgan Chase are among its top holdings. The ETF uses full physical replication, meaning it directly holds the shares of the companies in the index rather than relying on swap agreements or other synthetic instruments.

For investors who want low-cost, transparent exposure to the U.S. market, HSPX is a compelling option—particularly for those who prefer USD-denominated investments, as the fund trades in U.S. dollars.

While slightly newer and less talked about than its Vanguard counterpart, HSPX has built a strong track record over recent years. The fund has delivered robust returns, closely in line with the performance of the underlying index, and does so with minimal tracking error and administrative friction.

One point worth noting is the currency denomination. HSPX is priced and traded in U.S. dollars, which can appeal to those wanting to maintain exposure to USD or align their portfolio with dollar-denominated assets. However, UK-based investors should be aware that performance will still be impacted by movements in the GBP/USD exchange rate, unless currency hedging is applied externally.

With a total expense ratio of just 0.09%, this ETF remains highly cost-effective—especially for those who value HSBC’s brand and platform accessibility. It also pays quarterly dividends, adding some income to the mix, though most of the return will likely come from capital appreciation over time.

In summary, the HSBC S&P 500 UCITS ETF is a smart, efficient way to gain exposure to the top tier of U.S. companies. Whether used as the main equity position in a globally diversified portfolio or as a satellite fund in a more complex allocation, it brings solid performance, simplicity, and competitive pricing to the table.

Ideal for long-term investors seeking consistent growth from a broad-based U.S. index, HSPX earns its place among the best-in-class options for tracking the American market.

Xtrackers FTSE 100 UCITS ETF 1C

When it comes to capturing the performance of the UK’s largest publicly traded companies, the Xtrackers FTSE 100 UCITS ETF 1C (ticker: XDUK) offers a streamlined and cost-efficient approach. This fund tracks the FTSE 100 Index, which includes the 100 largest firms listed on the London Stock Exchange—many of which operate on a truly global scale.

With representation across key sectors such as financials, energy, healthcare, and consumer staples, the index includes well-known names like Shell, HSBC, Diageo, and GlaxoSmithKline. These companies are often mature, dividend-paying businesses with resilient earnings profiles, even during periods of economic uncertainty.

What makes XDUK stand out is its accumulating share class, meaning dividends from the underlying companies are automatically reinvested rather than distributed to shareholders. This makes it well-suited to those with a long-term growth mindset who prefer compounding returns over regular income.

With a total expense ratio of 0.09%, it remains one of the more competitively priced FTSE 100 ETFs on the market. This low cost, paired with the fund’s solid tracking of the index, makes it an attractive core UK equity holding—particularly for investors who want a hands-off approach to wealth building.

The FTSE 100 itself has historically been considered more of a value-tilted index, thanks to its concentration in sectors like energy and financials. While it may not move in lockstep with more growth-oriented indices such as the NASDAQ-100 or S&P 500, it brings important diversification benefits to global portfolios and has shown relative strength during periods of market rotation toward value.

In conclusion, the Xtrackers FTSE 100 UCITS ETF 1C provides a reliable, low-cost way to invest in the UK’s largest and most established companies. Its accumulating structure, physical replication, and sharp pricing make it particularly appealing for long-term investors who want to stay invested and reinvested—without the need to manually handle dividends.

Whether used as a domestic equity anchor or as part of a broader international strategy, XDUK is a quietly efficient option that deserves consideration in any well-balanced portfolio.

VanEck Defense UCITS ETF A

In an increasingly unpredictable geopolitical climate, sectors once considered niche are gaining more attention—and among them, defence and aerospace stand out. For investors looking to tap into the growing global focus on national security and military innovation, the VanEck Defense UCITS ETF (ticker: DFNG) offers targeted exposure to this critical and expanding industry.

This thematic ETF invests in a carefully selected group of companies involved in defence technology, weapons systems, aerospace engineering, surveillance, and military-grade communications. Key holdings include firms such as Lockheed Martin, Northrop Grumman, Thales, and BAE Systems—industry leaders that supply both domestic governments and international allies.

DFNG is not your typical core holding—but that’s exactly the point. This ETF is built for those who want a thematic tilt in their portfolio, offering a way to capitalise on long-term trends in global defence spending, military modernisation, and rising geopolitical tension. With many governments now committing to increased defence budgets, the sector has seen renewed momentum.

The ETF has delivered strong returns in recent years, outperforming broader indices over the same period. However, as with most sector-specific products, it comes with higher volatility and concentration risk. Its higher expense ratio of 0.55% reflects the complexity of tracking a specialised index, but may be justified for investors seeking this kind of targeted exposure.

Dividends are paid annually, though income is not the primary draw here—capital appreciation from increased global defence activity is the fund’s key value proposition.

DFNG is suitable for those seeking to diversify through satellite positions, particularly within a broader global equities portfolio. It also works well in strategies that aim to combine passive global exposure with specific industry allocations—such as technology, healthcare, or commodities—offering tactical options for investors with a defined macro view.

In summary, the VanEck Defense UCITS ETF provides access to a focused basket of companies operating at the heart of modern military infrastructure and innovation. For those who believe that defence spending will remain a long-term priority for governments worldwide, DFNG presents a compelling, if specialised, opportunity.

As with all thematic ETFs, it works best as a complementary holding—adding depth, conviction, and potential upside to portfolios willing to lean into specific global trends.

First Trust Low Duration Global Government Bond UCITS ETF GBP Hedged dist

Are you looking for a haven in fixed income with intermediate maturity and no currency surprises? For investors seeking stability in fixed income, without the complications of currency swings or long-duration risk, this fund offers a sensible middle ground. 

The First Trust Low Duration Global Government Bond UCITS ETF GBP Hedged (ticker: FGOV) is designed to provide exposure to high-quality government bonds across the globe, while limiting both interest rate sensitivity and foreign exchange volatility.

The fund tracks the ICE BofAML 3–5 Year Global Government Index, and uses physical replication, meaning it directly invests in sovereign bonds with maturities between 3 and 5 years from a broad range of developed markets. What makes it particularly appealing for UK-based investors is the GBP hedging, which neutralises the impact of exchange rate movements, helping to smooth returns over time.

This ETF offers a rare combination: global diversification, a short-to-intermediate maturity profile, and currency risk management. It’s particularly well-suited to investors who want to park capital defensively or reduce overall portfolio volatility, without sacrificing all exposure to yield.

Unlike long-duration bond funds, which are more sensitive to changes in interest rates, FSOV focuses on bonds in the 3–5 year range—providing a balanced duration that limits drawdowns when rates rise, while still offering modest income. The quarterly distributions add to its appeal for those looking for regular income in a lower-risk segment of the market.

With a total expense ratio of 0.55%, it is priced at the higher end for passive fixed income ETFs, but that reflects the complexity of maintaining global exposure while actively hedging currency risk—a trade-off that may be worthwhile for those seeking predictability in returns.

In summary, the First Trust Low Duration Global Government Bond UCITS ETF GBP Hedged is a practical solution for cautious investors aiming for stable, hedged exposure to high-grade sovereign bonds. Whether as a defensive core holding, a cash-alternative, or simply a diversifier against equity market volatility, this fund plays a quiet but important role in long-term asset allocation.

Which ETFs to invest in today?

The truth is that today we have only seen 7 of the best ETFs that you can find in the market, but you already know that there are countless types of exchange-traded funds, such as; dividend distribution, emerging countries, fixed income etc.

Since the list could go on indefinitely, here’s a simplified breakdown of several categories that have stood out as successful in 2025.

What are the best ETFs for long-term investment?

To begin with, ETFs designed for long-term investment typically track indices made up exclusively of companies based in developed economies—countries with liquid stock markets, strong regulatory systems, and high levels of per capita income.

In practice, this means broad indices such as the MSCI World or FTSE Developed, which include nations like the UK, the United States, Canada, Japan, Germany, France, and Australia. These countries are characterised by stable financial systems, transparent governance, and well-established market infrastructure—key elements that contribute to investor confidence over the long term.

Among all of them, the ETF with the highest 5-year return is the VanEck Morningstar Developed Markets Dividend Leaders (TDIV) with a return of 128.46% and lower volatility (12.14%), ideal for investors looking to increase their wealth without giving up stable quarterly income.

Best Dividend ETFs

Dividend ETFs are exchange-traded funds whose main objective is to offer periodic income via the dividends distributed by the companies in the portfolio. Unlike a "generic" ETF that pursues price growth, these products select stocks withhigh dividend yield, a history of annual increases, or stability in the payout.

Here is a selection of dividend ETFs that you cannot miss:

First, the VanEck Morningstar Developed Markets Dividend Leaders ETF (TDIV) invests in 100 large companies from developed markets known for steady dividend payments. It offers around 4% yield and pays quarterly dividends. It’s a solid choice for global dividend income with moderate growth.

Next, the iShares UK Dividend UCITS ETF (IUKD) focuses on high-yielding UK companies from the FTSE 350. Paying around 6% yield quarterly, it’s a great option for those wanting UK income without currency risk and is ISA and SIPP eligible.

For higher income, the Global X S&P 500 Covered Call ETF (XYLU) uses an options strategy to boost dividends, offering around 9% yield paid monthly. It suits investors who prioritise income but should be aware it can be volatile.

On the fixed income side, the iShares USD TIPS 0 to 5 ETF (TIP5) invests in short-term US inflation-protected bonds. With a low fee and semi-annual payouts, it helps protect against inflation and adds diversification.

Finally, the JPMorgan Global Equity Premium Income Active ETF (JPEI) combines active stock selection with an income-enhancing options strategy, delivering monthly dividends around 5.8%, making it an attractive income choice with some growth potential.

If you want a clear overview of these ETFs and how they might fit your portfolio, there’s a video below that explains everything in simple terms.

Best ETFs of China and Other Emerging Countries

When it comes to investing in China, ETFs typically track indices made up exclusively of Chinese stocks — including A-shares, H-shares, and ChiNext listings. These funds offer direct exposure to China’s dynamic but often volatile market, characterised by strong regulatory interventions and significant growth potential as the world’s second-largest economy.

Meanwhile, Emerging Markets ETFs cast a wider net, combining equities from a range of developing economies such as Brazil, India, Russia, South Africa, South Korea, Taiwan, and China itself. These markets tend to offer higher growth opportunities, but they also come with greater political risks and currency fluctuations compared to developed markets.

Here’s a quick overview of some popular ETFs in this space:

Leading the pack is the SPDR MSCI Emerging Markets Small Cap UCITS ETF (SPYX), which has delivered an impressive 5-year return of 71.8%. Its focus on smaller companies provides access to dynamic growth opportunities, although investors should be comfortable with a moderate volatility level of around 16%.

Close behind is the iShares Edge MSCI EM Value Factor UCITS ETF (EMVL), which tilts towards value stocks in emerging markets, offering a 67.12% return over five years, but with slightly higher volatility.

Ultimately, these ETFs provide diverse ways to tap into the growth potential of less-covered markets, helping investors diversify beyond traditional developed economies. However, it's important to bear in mind the increased risks—both political and currency—that come with investing in emerging markets.

👉 Read here for more on the Best Small Cap Stocks in the UK.

Best Fixed Income ETFs

Fixed income ETFs are funds that track indices made up of debt instruments such as government bonds, corporate bonds, securitisations, emerging market debt, and inflation-linked bonds. Unlike equity ETFs, which invest in shares, fixed income ETFs focus on bonds of varying maturities (short, medium, or long term) and credit quality (investment grade or high yield). Their aim is to provide regular income through coupon payments while generally experiencing lower volatility than equities.

Below is a table highlighting five popular fixed income ETFs that invest primarily in US corporate bonds, with a focus on high yield and short to medium durations:

Leading the pack is the PIMCO US Short-Term High Yield Corporate Bond UCITS ETF (ticker STHY), which has achieved a five-year return of 32.53%. It carries a slightly higher Total Expense Ratio (TER) of 0.55%, reflecting active management and its focus on short-term high-yield bonds.

Close behind is the Amundi US Inflation Expectations 10Y UCITS ETF (INFU), which targets the 10-year inflation outlook and has delivered a 30.99% return over five years. Its low TER of 0.25% makes it a cost-effective option for investors looking to hedge against inflation.

Overall, fixed income ETFs have grown in popularity among UK investors as they offer accessible exposure to bond markets that were once difficult for retail investors to access. They provide steady income streams and diversification benefits, making them a valuable addition to a balanced portfolio.

Best Gold ETFs

When it comes to buying, storing, or insuring physical gold bullion, many investors prefer to avoid the hassle of handling the metal directly. Instead, they often choose Exchange-Traded Commodities (ETCs) backed by physical gold — bullion held separately according to LBMA (London Bullion Market Association) standards. Some ETCs use synthetic replication through derivatives, but these typically come with added costs for custody or financing.

Here are some popular physical gold ETCs available to investors in Europe, including those based in the UK. You’ll probably recognise the first one:

The Xtrackers Physical Gold ETC Securities (ticker XGLD LN) leads this segment with a 5-year return of 84.65%, while maintaining a very low Total Expense Ratio (TER) of 0.11%. This is partly thanks to its use of LBMA-standard bars and efficient tracking methods.

Close behind is the iShares Physical Gold ETC (ticker PPFB), which has delivered around 79% return over five years with a TER of just 0.12%. This ETC provides direct exposure to the spot price of gold via debt securities backed by physical bars stored in segregated vaults at JP Morgan.

Gold has been one of the most sought-after assets in recent years, with prices rising by over 100% in just three years. As a recognised safe-haven investment, especially amid global uncertainty, allocating a portion of your portfolio to gold can offer valuable protection.

👉 Find out more here on how to invest in gold.

🔊 Want to know how to build an ETF portfolio that lets you receive dividends every month?

FAQs

What is an ETF?

Understanding what an ETF is and how it works begins with recognising that an ETF, or exchange-traded fund, is a financial product that invests in a basket of securities.  They behave like stocks and are taxed like them. That is, they can be bought and sold at any time of the day. They are transparent in the sense that we can know their net asset value at any moment and also the composition of their portfolio.

They have a creation and redemption process that makes them more tax-efficient in their internal operation and with lower operating costs, therefore, they are not prone to a massive exit of participants affecting management and returns. They are easy to understand and also simpler to analyse than an actively managed fund or a stock.

How to choose the best ETFs for your portfolio?

One thing is to know the best ETFs according to their accumulated performance, but what is really important is knowing how to choose an ETF, that is, assessing when an exchange-traded fund is optimal for your portfolio and strategy.

There are many indicators you can use to choose yours, but the most important ones are:

• Having a clear strategy. The strategy is not something abstract; it is what will tell you which ETFs to buy, when to buy them, and when to sell them.
• The TER or Total Expense Ratio, which tells you the total cost of the ETF.
• Its bid/ask spread or buy-sell spread because it will give you clues about its liquidity, and that of its underlying assets.
• The index it replicates, which will tell you what you are investing in.

What are the risks of investing in ETFs?

Like any investment, ETFs carry risks. These can include market risk, where the value of the underlying assets falls; liquidity risk, which might make it difficult to buy or sell ETF shares quickly; and tracking error, where the ETF's performance doesn’t perfectly match its benchmark index. It’s important to understand the specific risks tied to the ETF’s focus, whether it’s equities, bonds, or more specialised sectors, and how these fit with your overall risk tolerance.

Can ETFs pay dividends, and how are they distributed?

Many ETFs pay dividends if the underlying securities generate income, such as stocks with dividend payments or bonds with interest. Some ETFs distribute these dividends directly to investors on a regular basis (quarterly, semi-annually, or annually), while others reinvest the income back into the fund (accumulating ETFs). Understanding the dividend policy of an ETF helps investors plan their income expectations and tax considerations accordingly.