When investing in a tracker fund that mirrors an index like the FTSE 100, does the choice of fund really matter? It’s akin to deciding whether to buy your groceries from Tesco or Sainsbury’s—essentially, the source remains the same.

However, not all tracker funds are created equal, despite similar labels. If you have specific investment goals, it’s crucial to do thorough research.

All tracker funds aim to emulate the holdings and performance of a chosen index, such as the S&P 500 or the Dow Jones.

As I shared last week, about 80% of my investment portfolio is in one global tracker fund, leading many to ask: which one?

This is a valid question. Selecting a tracker fund can be more challenging than choosing an actively managed fund, where a manager picks stocks instead of relying on an algorithm to replicate an index.

According to Trustnet’s data, 225 funds exist in the UK All Companies investment sector, all aiming to invest in UK equities. Yet, their approaches vary significantly, influencing performance outcomes. Over the past year, the best-performing UK All Companies fund grew by 27.3%, whereas the worst declined by 5%.

The differences among trackers are subtler. The initial step is determining which index you want to track. My goal was to build an investment portfolio with a broad tracker at its core for diversified exposure across regions and sectors. This would allow me to add satellite holdings for more targeted investments.

• Best investment platforms for beginners

I chose a global approach. Yet, global indexes often favor US and big tech stocks due to their significant market cap.

To avoid this bias, consider an equal-weighted tracker, which allocates an equal proportion of funds to each stock. However, in a portfolio of 7,000 stocks, each stock would only receive about 0.01% allocation, which might be too insignificant.

While the equal-weight strategy has its merits, I believe that larger, successful companies have earned their status. Thus, allocating more to them makes sense.

I opted for a market-cap weighted approach, meaning the larger the company, the greater its share in the portfolio. For example, Microsoft is the top holding in my fund, representing 4% of assets.

• How to invest £10,000

Diversification comes into play here. The top 10 holdings in my fund constitute 19% of its assets, featuring well-known names like Apple, Nvidia, and Amazon. One could argue this fund is US-centric and tech-heavy.

However, my chosen fund is an ‘all-cap’ fund that includes companies across the market cap spectrum. Smaller companies account for around 5% of assets, unlike many global trackers that exclude them.

In this context, smaller companies can still be worth up to $2 billion, a stark contrast to Apple’s $3.3 trillion valuation. Meanwhile, mega-caps make up 43% of my fund’s portfolio compared to an average of 63% for similar funds. Additionally, my exposure to Asia is higher than average at 17% versus 9.7%.

Although this may seem like fine-tuning, it adds an extra layer of diversification and offers some protection during market fluctuations like those experienced last week.

This is not the sole exposure my portfolio needs to small-caps or Asia, but if it reduces risk away from the dominant tech giants, I’m satisfied.

Next steps involve reviewing annual charges, where lower is preferable. Assess the tracking error to see how closely the fund follows its index. Check assets under management, avoiding overly small funds. Consider the currency (some trade in dollars, affecting returns) and choose accumulation units if you want your dividends reinvested. Decide if you prefer an open-ended fund or an exchange-traded fund for more control over buying and selling.

The final decision is selecting a fund house to manage your tracker. This is akin to choosing a trusted brand for groceries; the difference among comparable trackers from iShares, Fidelity, or SPDR is minimal.

• Are you paying too much for your index fund?

So, which fund did I choose? Many guessed it—it’s the Vanguard FTSE Global All Cap Index. It charges 0.23% (with an additional platform fee), automatically reinvests dividends, and has been performing well for me.

While it’s not the only investment in my portfolio—it’s good to diversify—I’m pleased to use it as the primary building block for my broader investment strategy.