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Fund Supermarket Guide

Pros and Cons

What are the Pros and Cons of using fund supermarkets?
To decide about investing through a fund supermarket, consider some of the advantages and disadvantages of using one.

Pros

- Many offer significant discounts on the initial charge of a fund. The charge is often converted into extra units or shares and passed back to you.
- Even more supermarkets now allow a mix of funds from several different management groups in one ISA wrapper, combining high risk and low risk funds from a wider range.
- A fund supermarket provides a portfolio monitoring tool and a consolidated statement, enabling the investor to view all purchases online and receive a statement, usually twice a year (this is useful if the investor has chosen the mix and match ISA option).
- Many supermarkets accept ISA transfers.
- Fund supermarkets allow instant transfer of funds. Some supermarkets have no charge for switching between funds and management groups. The best of them may also have the ability to perform a same day transfer, ensuring that money is never out of the market.
- It is possible find a route to invest and manage an account through a channel of choice, whether that is online, over the telephone or via paper methods.
- Most supermarkets are equipped with search tools to help narrow down fund choice. Some may enquire about risk preferences and investment objectives.

Cons

- Although many funds offered through a fund supermarket have low initial charges, the annual and most significant charge almost always remains at full price.
- Not all transactions are fully online. Despite an online presence investors may still be required to provide a paper-based confirmation before investment; conversely, some supermarkets can only process lump sum investments online.
- Some supermarkets operate 'ISA-only' platforms. These would be unable to accommodate transactions that stepped outside of that framework.
- Many online supermarket models are designed with the independent investor in mind. Although many provide online search tools and highlight the best performing funds, few offer tailored advice on what to buy (there are usually some details on how to contact an IFA, though).
- Some fund supermarkets operate a tiered charging system, even though they offer discounts. Investors need to be clear about all the charges they are likely to incur.
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