What's a Fund Supermarket - and Why Should I Have One?
Branching out into the world of fund supermarkets can be a fairly daunting task: there is a lot to consider for a first-time investor. Lucky for you, we’ve done the legwork for you and compiled the basis all into one blog for you to get to grips with fund supermarkets.
What is a fund supermarket?
A fund supermarket is a platform which allows people to buy, sell and hold your investment funds.
The clue’s in the name – there are a variety of different kinds of open-ended funds available, much like the variety of brands you can find of any given product at a supermarket. Some may also offer investment trusts, shares or ETFs (exchange-traded funds).
Why should I have one?
The main advantages of the fund supermarket is that the costs are comparatively low and they are a very convenient way to invest; the name ‘supermarket’ gives the game away. There is a lot of choice, so there should be something to suit everyone and you should be able to choose at your convenience.
They’re mostly online (although some offer services by phone) and if you want to have a look at great rates on fund supermarket ISAs, have a look at our page to compare the best rates.
What should I look for?
If you’re new to fund supermarkets and wondering what you should be looking for, a good fund supermarket should offer:
- Index-Tracker funds
- Actively Managed funds
- Multi Asset funds
- Income funds
- Property fund
- ISA and SIPP Tax wrapper options
- Share dealing account options
What do I need to bear in mind?
If you want to invest your money into a fund supermarket, remember that they are providing you a service – and that service isn’t free, so there will be fees. These tend to be annual fees and dealing fees, which will vary depending on the platform. Annual fees are to have an account and dealing fees are charged when you buy/sell or change investments.
The cheapest isn’t always the best option, so make sure you get a whole-view before making a choice.
How much can I put in a fund supermarket ISA?
As a fund supermarket ISA the ISA rules apply: your ISA limit remains at £20,000 (for tax year 2019/2020 – which will remain the same for tax year 2020/2021).
So, theoretically you can put up to £20,000 tax-free into a fund supermarket ISA per person per tax year, assuming you’ve not opened any other ISAs in this tax period. If you have, just subtract the amount you have already put into an ISA from £20,000 – the result of that sum is the amount of money you have left of your allowance.
If you want to invest the whole of your ISA allowance, you are able to – but diversifying your investments is always a good idea, so examine your needs and consider whether spreading your money across multiple different ISA accounts (e.g. Cash ISAs or Lifetime ISAs) might suit you.