And while investing all your money in a single market isn’t advised, it’s perhaps only natural for UK retail investors to show a degree of home bias and favour investing in the FTSE 100 or FTSE 250, at least when starting out.

But which is likely to give better returns if I were to buy today? In order to answer that, we need to look at some basic facts.

Overseas earnings

The FTSE 100, of course, contains the biggest companies listed on the London Stock Exchange. Think Unilever, HSBC and Vodafone – businesses that just about everyone in the land recognises.

What those new to investing and the stock market may overlook, however, is that the vast majority of these companies make most of their cash overseas.

The fact that these earnings will be denominated in foreign currency is important since it means that these firms benefit from a fall in the value of sterling, which is exactly what has happened since the outcome of the referendum vote all the way back in 2016. 

While many of the companies in the FTSE 250 will also have some of their earnings coming in from abroad, their success will depend to a greater extent on the health of the UK economy.

Go even further down the market food chain and you’ll find lots of firms whose ability to remain profitable depends entirely on what’s happening on these shores, hence why the last few years of political uncertainty have been particularly hard for some owners to stomach.

Brexit bounce?

Right now, it could be argued that any kind of resolution to the current impasse over Brexit, be it in the form of a no-deal, the acceptance of Theresa May’s request for an extension (which should be decided at some point today) or even the UK remaining in the EU permanently could see a bounce in UK stocks. As with most events, the market tends to dislike uncertainty more than a perceived ‘negative’ outcome. 

While any plan for action could see a rise in both indexes, the FTSE 250 could benefit the most if whatever agreement is reached pleases the market. If the worst possible scenario plays out, the FTSE 100 could be the best (or at least more reliable) horse to back, at least in the short term.

That last bit is important. As long-term investors, we’re very much believers that it is time spent in the market rather than market timing that leads to wealth. As such, an investment in either index should do your wealth no harm at all if you buy and hold for years rather than months. 

So how do you go about getting exposure to either index?

If you prefer the geographical diversification offered by the FTSE 100 then an investment in a cheap fund such as that offered by Blackrock is probably the best way forward. Its iShares Core FTSE 100 product has a total expense ratio of just 0.07% and yields 4.2%. Those interested in the FTSE 250 could go for Vanguard’s exchange-traded fund, which has an ongoing charge of only 0.1%.

The post Is it better to buy the FTSE 250 or the FTSE 100 right now? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Property pain

A few years ago, I would have suggested investing in buy-to-let alongside a balanced portfolio of stocks and shares, but I wouldn’t suggest that today. The Treasury’s tax crackdown has taken the joy out of buy-to-let, and replaced it with endless pain.

First, investors are marked out by paying a 3% stamp duty surcharge, adding thousands to the purchase price. They have also seen their wear-and-tear allowances diminished. Worst of all, they can no longer claim higher rate tax relief on their mortgage interest payments, even if they are higher rate taxpayers themselves.

On the attack

Add to that a raft of ever-tighter regulations, including new rules covering houses in multiple occupation (HMO) and evictions, changes to energy efficiency measures and more potential horrors on the way, including three-year tenancies, and I can’t see why people would bother. The Government is wilfully destroying the buy-to-let market, and a Labour government would be even more aggressive.

We are even seeing the rise of the buy-to-let landlord prisoner, trapped in overpriced mortgages because they cannot meet lenders’ tough new affordability testing.

Looking for trouble

Then you have all the bother of finding the right property, doing it up, advertising for tenants, chasing deposits, signing contracts, doing inventories and dealing with any emergencies, and finding new tenants when they leave.

Do you really need all this when you can trade shares in an online dealing account for around a tenner, while avoiding thousands of pounds in stamp duty, estate agency, conveyancing and mortgage arrangement fees?

You can also trade shares in seconds, whereas buying and selling property can take months. In a downturn, you might not sell it at all.

Joy of tax

If you invest via your stocks and shares ISA allowance, you escape all income tax and capital gains tax on your returns. Buy-to-let landlords can only dream of a benefit like that. In fact the only advantage property retains is gearing, because when you take out a buy-to-let mortgage you are borrowing money to invest, leveraging up your returns.

Most newbie investors focus on the FTSE 100 and understandably so, as the index tracks the country’s 100 largest companies. However, spare a thought for the FTSE 250, which covers the next 250 companies size-wise, and gives you exposure to faster-growing medium-sized stocks.

Over the last five years, the FTSE 250 has outperformed, with the low-cost unit trust tracker HSBC FTSE 250 Index returning 37% against 27% from the HSBC FTSE 100 Index. Both funds have no upfront costs and ongoing fees of just 0.28% and 0.17% respectively.

I don’t know why anybody would bother with buy-to-let when they can buy funds like those two quickly and easily, or top investment trusts like these two.

I wouldn’t put money in a cash ISA either, but that’s a different story.

The post Here’s why I’d rather invest in the FTSE 250 than bothersome buy-to-let appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Fees cost

ETFs have come into their own in recent years as investors wake up to the damage that high annual management fees inflict on investment fund performance. Say you invest £1o0,000 in a portfolio of actively-managed funds charging 1% a year. If it grows at 5% a year, you will have more than doubled your money to £219,112 over 20 years. However, if your ETFs charge 0.2% on average (and some charge as little as 0.03%), you will have £255,402, an incredible £36,290 more, assuming the same rate of fund growth.

If managers could regularly beat the market they would justify their higher costs, but three-quarters don’t. Investors are waking up to the message and these three ETFs are particularly popular, numbering among the top five most traded in the UK.

Vanguard performance

The first is the Vanguard S&P 500 Growth ETF (LSE: VUSA), which does exactly what it says on the tin, tracking the S&P 500. The total expense ratio is a minuscule 0.15% a year, which Vanguard claims is 87% lower than the average charge on funds with similar holdings.

Over five years it’s up 140%, according to Trustnet.com, piggybacking on the booming US market. Look at this: the average actively-managed fund in the Investment Association North America sector has returned notably less at 113%, according to Trustnet.com. The charges will be higher as well.

iSpy iShares

You won’t be surprised to discover the second most popular ETF among British investors is the iShares FTSE 100 ETF (LSE: CUKX), which tracks the UK benchmark index of blue-chip stocks. Its ongoing charges are even lower, at just 0.07%, and it has grown 52% over five years.

Unit trust trackers have also become cheaper. For example, HSBC FTSE 100 charges just 0.18% a year. However, on £10,000 invested for 20 years, this is the difference between ending up with £25,638 (iShares) or £25,298 (HSBC). That slither of a charging difference has amounted to £340.

Mid-cap winner

In a single low-cost swoop, you’ve now bought into 600 of the largest companies in the Western world, big names such as Apple, Microsoft, Exxon Mobil, Amazon and Facebook in the US, and HSBC Holdings, Royal Dutch Shell, BP and British American Tobacco in the UK.

My third suggestion for your early retirement ETF portfolio is the iShares FTSE 250 (FTSE: MIDD), the fifth most popular ETF in the UK. This mid-cap index has thrashed its blue-chip counterpart lately, and the ETF is up 100% accordingly. Now you have a spread of smaller companies to go with your retirement portfolio’s big boys. However, the total expense ratio is slightly higher at 0.4%. That’s actually more than the HSBC FTSE 250 tracker, whose ongoing charges total 0.18%.

ETFs may be cheap, but they’re not always cheapest. Yet when their performance is so strong, they certainly are very appealing.

The post Retire early with these 3 ETFs appeared first on The Twelfth Magpie.

More reading

• £10,000 put in a Cash ISA at the start of 2026 is now worth…

Harvey Jones holds iShares FTSE 100, HSBC FTSE 100 and HSBC FTSE 250. The Motley Fool UK owns shares of and has recommended Amazon.com and Facebook. The Motley Fool UK owns shares of ExxonMobil. The Motley Fool UK has recommended BP, HSBC Holdings, and Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.