I put £5k into the FTSE All-Share tracker fund one year ago. Here is what I have now

In July last year, I started a plan to top up my new investment pension (SIPP) by purchase FTSE Shares Everything tracker bag.

I have just transferred three legacy company pensions into my SIPP, every penny is always cash. While I was still getting interest I was determined to use it as soon as possible, by investing in stocks.

Most of my portfolio is invested in individual stocks, but I wanted to take my time picking them. So I hit £5,000 on Vanguard FTSE UK All Share Index Unit Trust without a moment's hesitation. I can easily buy another popular All-Share tracker, for example, SPDR FTSE All Share UCITS ETF (LSE: FTAL). It is one of the longest established.

Income and growth

Tracker funds give me a little exposure to all the stocks in FTSE 100 again FTSE 250, and the spread of small caps. Even better, they do this at low cost, with no upfront fees and low ongoing costs. The SPDR ETF, for example, costs 0.2%. Vanguard is even cheaper, charging just 0.06%.

I still miss the days when FTSE trackers charged 1% per annum, or sometimes more. That may not sound like much but, over time, the impact is huge.

Say I invested £5k in a tracker that charges 0.06% a year and the index has grown at an average of 8% a year, about the long term return on the UK stock market. After 25 years, I will have £33,770. But if the fund charges 1%, I'll have £27,137. That's £6,633 less.

The charge difference becomes larger for larger colors. Let's say I invest £5,000 every year over that 25 year period. With the low cost fund I would have £424,882 after 25 years, the high cost fund would give me £365,520. That cost me an incredible £59,362.

Selling my winner

I bought my Vanguard tracker on July 7th last year and found one thing dead. I like to buy cheap stocks when the markets are low and the index was in summer mode. My £5k investment is now worth £5,875.46, a total return of 17.51% in just over a year.

Over 12 months, the FTSE All-Share is up 7.7%. I am ahead for two reasons. First, I bought a dip. Second, my total return includes reinvested shares. The current yield is 3.7%.

I'm glad it's back, but now I have a problem. Most of my SIPP is invested in individual stocks, many of which have broken the All-Share. Others have done worse, but they are few in number and I support them to recover in style.

This gives me the confidence to believe that I can beat the FTSE average return by picking individual stocks. So soon I may be betting profits on my tracker to raise money to buy individual stocks. I'll say goodbye. It worked well for me.