If you want to grow your wealth with minimal effort, automatic investing in index funds and ETFs is one of the most powerful tools available. Whether you're saving for retirement, a home deposit, or just building long-term financial security, investing on autopilot helps you stay consistent, avoid emotional decisions, and benefit from long-term market growth.
This article is a complete, SEO-optimised guide for UK investors who want to start automatically investing in index funds and ETFs. We’ll cover the best strategies, platforms, account types, and common pitfalls — all written with UK-specific regulations, tax benefits, and tools in mind.
What Is Automatic Investing?
Automatic investing (also called auto-investing or recurring investing) involves setting up a regular investment schedule — typically monthly — into chosen funds or ETFs. Instead of manually buying shares each time, your selected platform automatically invests your contribution according to your preferences.
You can automate investing in:
Index funds – Mutual funds tracking indices like the FTSE 100 or S&P 500
ETFs – Exchange-Traded Funds that also track indices but trade like shares
Robo-advisors – Platforms that invest for you in pre-built, diversified portfolios
By automating the process, you benefit from:
Pound-cost averaging (smoothing out market volatility)
Consistent investing behaviour
Less emotional decision-making
Hands-free wealth building over time
Index Funds vs ETFs: What’s the Difference?
Before setting up automatic investing, it’s important to understand the difference between index funds and ETFs, as both are commonly used in passive investing.
Index Funds:
Usually set up as mutual funds
Priced once per day (not traded on the exchange)
Often have lower trading requirements
Great for monthly contributions (ideal for automatic investing)
ETFs:
Traded on stock exchanges like regular shares
Can be bought and sold throughout the day
Often have slightly lower fees than mutual funds
May require a platform that supports fractional investing
In practice: Both are excellent for passive investors. If you're using a platform that allows auto-investing into ETFs, either option works. Index funds tend to be simpler to manage automatically.
Best Platforms for Automatic Investing in Index Funds and ETFs (UK)
Several UK-based investment platforms offer automatic investing features. The right one for you depends on your budget, tech comfort level, and preferred funds.
1. Vanguard UK
Offers direct access to its LifeStrategy and index fund range
Monthly investing from £100
Clean interface, low fees (typically 0.15% platform fee + fund fees)
Ideal for long-term investors
Bonus Tip: Vanguard’s LifeStrategy funds automatically adjust risk and asset allocation over time — perfect for fully hands-free investing.
2. InvestEngine
Specialises in ETFs
No platform fees for DIY investing
Auto-invest feature available
Great for low-cost ETF portfolios
Minimum investment as low as £100 lump sum or £25 monthly
3. Fidelity UK
Offers a wide range of index funds
Monthly investing options from £25
Good for investors who want to access more fund providers beyond Vanguard
4. Nutmeg and Moneyfarm (Robo-Advisors)
Automatically invest your money based on your risk profile
Ideal if you don’t want to pick funds yourself
Fees range from 0.45% to 0.75% depending on platform and investment size
Includes automatic rebalancing and tax wrapper management
How to Set Up Automatic Investing Step-by-Step
Step 1: Choose a Platform
Pick a platform that offers both your preferred funds (index or ETF) and the ability to automate contributions.
Step 2: Open a Tax-Efficient Account
Use a Stocks and Shares ISA or Self-Invested Personal Pension (SIPP) to avoid paying tax on your gains and dividends.
Step 3: Select Your Fund(s)
Popular choices for automatic investing include:
Vanguard LifeStrategy 60% Equity Fund
iShares Core FTSE 100 ETF
Fidelity Index World Fund
Vanguard FTSE Global All Cap Index Fund
Choose funds that align with your time horizon and risk tolerance.
Step 4: Set Up Monthly Contributions
Link your bank account and set a regular payment schedule (e.g. £100/month). Most platforms allow you to select a date and will auto-invest into your chosen fund.
Step 5: Enable Auto-Reinvestment (if available)
Reinvest dividends automatically to maximise compound growth. Most platforms offer this as a simple toggle.
Step 6: Leave It Alone
Don’t check your portfolio daily. Review once or twice a year and only make changes if your goals or circumstances change.
Key Benefits of Automatic Investing
1. Consistency Without Thinking
Life gets busy. Automatic investing ensures you're building wealth even when you're not actively thinking about it.
2. Pound-Cost Averaging
Investing monthly means buying more when prices are low and less when they’re high, reducing the impact of market volatility over time.
3. No Market Timing Required
Trying to time the market rarely works. Automatic investing removes the temptation to guess when to buy.
4. Builds a Long-Term Habit
Treat your investments like a monthly bill — but one that pays you in the future.
Things to Watch Out For
1. Platform and Fund Fees
Even small differences in fees can add up over decades. Always compare:
Platform fees (e.g. 0.15%–0.45%)
Fund fees (e.g. 0.07%–0.25% for index funds)
2. Minimum Contribution Requirements
Some platforms require at least £25–£100/month. Choose one that matches your budget.
3. Tax Wrappers
If you don’t use an ISA or pension, you could end up paying unnecessary Capital Gains Tax or Dividend Tax.
4. Limited Fund Choices
Certain platforms (like Vanguard) only offer their own funds. If you want broader fund access, look at Fidelity or AJ Bell.
How Automatic Investing Helps Build Long-Term Wealth
By combining automatic investing with tax efficiency and low-cost funds, you tap into some of the most powerful wealth-building tools available. Over time, even small monthly contributions grow significantly due to compound interest.
Example scenario:
£200/month into a global index fund
6% annual return (after fees)
30 years
= Over £190,000 invested and grown — most of it from growth, not your own money.
You don’t need to be an expert or predict markets — you just need time, discipline, and automation.
Advanced Tip: Combine Automatic Investing with Lump Sums
While monthly investing is great for smoothing volatility, if you receive a bonus, inheritance, or lump sum — invest it as soon as possible. Statistically, investing a lump sum up front performs better over time than spreading it out. You can still continue your monthly contributions alongside it.
Frequently Asked Questions (FAQs)
Is automatic investing safe?
All investing involves risk, including loss of capital. However, automatic investing reduces emotional decisions and promotes discipline — two key factors for long-term success.
Can I invest automatically through a Stocks and Shares ISA?
Yes. Most UK platforms allow you to set up automatic contributions within a tax-efficient ISA wrapper.
What's better for auto-investing: ETFs or index funds?
Both are excellent. Index funds may be easier for monthly investing, while ETFs offer more flexibility if your platform supports fractional investing.
How much should I invest each month?
As much as you comfortably can. Even £50–£100/month adds up over time. Increase contributions as your income grows.
What happens if I miss a payment?
Most platforms will simply skip the investment that month. You can restart it anytime. There are no penalties.
Can I stop automatic investing whenever I want?
Yes. You remain in full control and can pause or stop contributions with a few clicks.
Final Thoughts
Automatic investing in index funds and ETFs is one of the smartest, simplest, and most reliable strategies for building wealth in the UK. It requires no market expertise, little time, and minimal effort — just a commitment to consistency.
By combining tax wrappers, low-cost funds, and automation, you’re giving yourself the best chance of long-term financial success. Whether you're investing £50 or £500 per month, starting today could make all the difference in your future.
Subscribe for more tips! Subscribe to our newsletter
Disclaimer: Smart With Money may receive compensation from affiliate links, advertisements, and partners featured on this site. This compensation does not influence our editorial content, reviews, or recommendations. Our opinions are our own, and we aim to provide accurate and objective financial information to help you make informed decisions.
Additionally, all content provided on SmartWithMoney.co.uk is for informational purposes only and does not constitute financial advice. Please seek independent financial advice before making any financial decisions.