An index fund holds a small piece of every company in a particular market. A global index fund holds a small piece of thousands of companies across dozens of countries. When you buy one, you're buying the performance of the market as a whole, not betting on individual companies.
A fund charging 0.2% in annual fees versus one charging 1.5% sounds like a small difference. On £100,000 invested over 20 years at 7% average returns, the 0.2% fund leaves you with roughly £370,000. The 1.5% fund leaves you with around £300,000. The difference is £70,000, paid to the fund provider.
The cheapest global index funds charge 0.07% to 0.22% a year. Actively managed funds typically charge 0.75% to 1.5%. Academic research consistently shows active funds underperform cheap index funds over the long term.
Open a Stocks and Shares ISA with a provider (Vanguard, Fidelity, AJ Bell and others). Choose a global index tracker. Set up a regular monthly contribution. A Stocks and Shares ISA shelters all returns from tax — no capital gains tax on growth, no income tax on dividends.
For retirement money, a SIPP (Self-Invested Personal Pension) gives the same investment options with upfront tax relief. Basic rate taxpayers get 20% relief on contributions, higher rate taxpayers 40%.
For most people starting out, a single global equity index fund covers everything. Vanguard FTSE All-World, Fidelity Index World and iShares Core MSCI World are commonly used options in the UK.
Keep contributing. This is where most people go wrong. Stopping contributions when markets fall means buying less when prices are lower, which is the opposite of rational. Set up the direct debit, look at it infrequently, and let time do the work.