Fund supermarkets are web sites that open the door to do-it-yourself investing by letting you buy, sell and manage your investments from a smart phone, tablet or computer.
Using a fund supermarket can give you control of your investments, but you need to think carefully before diving in.
Here are some of the points to consider before deciding which one to use.
What can you buy?
The market place is much broader with a fund supermarket than investing through a managed fund.
Most will let you buy shares, funds, bonds, trade foreign currency and hold cash.
Depending on the supermarket, the range of investments is huge.
Not all supermarkets offer the same products and services, so check the one you are opting for suits your needs.
Most will let you hold a range of accounts, such as holding investments personally or with a pension.
All your investments will be under one roof with a single account allowing access 24/7.
How does a supermarket make money?
Fund supermarkets charge a fee, but the charging model varies. Some take a flat fee while others take a percentage slice of the value of your fund.
If you have a large fund, a flat fee may be the best option.
The fee is not performance related and will still be taken if your investments rise or fall.
Returns are quoted gross of fees, so do not forget to include them when working out yields.
Fund supermarkets are self-service
The supermarket will not offer investment advice as part of the package, but may as a separate, add-on service.
Most have online calculators and other investment tools. You will also find a library of performance data and key feature advice sheets designed to help you decide which investments to buy.
Beware, as these are marketing tools for the fund and may not offer all the information you need to make a sensible investment decision.
Don’t micromanage your investments
Easy access comes with the temptation of buying and selling as a knee-jerk to market movements.
Trading investments will trigger extra fees, so you need to find out what they are. The cost of too much trading will impact your portfolio value on top of your other charges.
Don’t forget most investments are for the medium to long-term, which means five to 15 years. Hold your nerve and weather any market storms rather than chopping and changing investments regularly.
Beat the tax man
If you hold cash or investments as an individual, any interest, dividends or capital gains may be taxable.
Wrapping them in a pension or other tax-free growth environment can make the same investments increase with the benefit of tax-free growth.