Picking passive funds for your Lifetime ISA
An easy, low-cost way to invest in your LISA.
A Lifetime ISA is built to help you with one of life’s big milestones – buying your first home or saving for retirement. However you plan to use yours, if you're looking to grow your money over time, investing could be the way to go.
And when it comes to investing, passive funds are one of the simplest, lowest-cost ways to get started.
Wait...what’s a passive fund?
In short, passive funds aim to track the market, not beat it. So instead of having someone pick and choose which investments to go for, a passive fund follows a set group or ‘index’ (e.g. the biggest UK companies or a global mix) based on fixed rules.
That means no one’s actively managing your money (which keeps costs down), you’re usually investing in lots of companies in one go, AND you don’t need to be glued to the markets every day.
They’re popular for a reason – in fact, on Dodl, the top two most-bought investments in 2025 so far have been passive funds.
Now, let’s break down how to pick your passive funds into 4 easy steps:
1. Start with your goal (and how long you’ve got)
Your investment goal shapes everything else – and with a Lifetime ISA, it’s usually one of two things:
- Buying your first home – so you might only be investing for a few years
- Saving for retirement – which could mean investing for decades
If you’ve got a longer time horizon (like saving for retirement), you might be more comfortable taking on more risk, because there’s time to ride out market ups and downs. For shorter-term goals (like your first home), you may want to take a bit less risk to protect your pot.
Passive funds come in all shapes and sizes – from global shares to UK bonds, and even options like property or gold – so you can match your mix to your goal.
2. Decide what kind of things you want to invest in
One of the best things about passive funds is that they instantly spread your money across lots of investments – helping you dodge the “all your eggs in one basket” trap.
If you want a bit of everything, a global tracker is a great place to start. These funds invest in companies around the world based on their size. Just be aware that most global funds have a lot of exposure to US companies – around two-thirds at the moment.
Want to mix it up more? You can choose funds that focus on specific regions (like Europe or Asia) or industries (like clean energy or tech), and build a blend that feels right to you.
3. Pick your actual funds
Once you know what you’re aiming for, it’s time to choose the funds to get you there.
Things to look out for:
- What is the fund tracking? For example, a UK fund might track just the top 100 companies (FTSE 100) or a broader mix (FTSE All-Share).
- How niche is it? Some funds track certain trends like AI or sustainable investing. These can be exciting, but always check what’s under the bonnet – some aren’t as diverse as they seem.
You can mix and match index funds and ETFs too – they’re both passive, just bought slightly differently. ETFs trade like shares during the day, while index funds are bought once a day at a set price.
4. Keep an eye on charges and performance
Passive funds are known for being low-cost – but fees can still vary a lot, even for funds that do the same thing.
For example, some global trackers charge just 0.12% a year, while others charge nearly five times that. And the more you pay in fees, the less of your return you get to keep.
Two things to check:
- Ongoing charges – this is the annual fee for holding the fund
- Tracking difference – how closely the fund follows its index (the smaller the difference, the better)
Want to explore some options?
Once you’ve got a rough idea of what you’re after, head over to Dodl’s investments to browse index funds and ETFs that could be a good fit for your Lifetime ISA.
And if you ever feel stuck, we’re always here to help with a nudge in the right direction.
🔔 Always remember, the value of your investments can go down as well as up. Dodl doesn’t give financial advice, but we do hope the info is helpful! Past performance is not an indicator of future performance.