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Jun 18

A beginner’s guide to fund supermarkets

Reading Time: 8 mins

Fund supermarkets are a good way to invest in companies and funds quite cheaply.

They all have different fee structures and it’s worth reading up about them to find out which would be the best for you.

We’ll look at what they are, how to get started, and some of the options on the market right now.

 

What is a Fund Supermarket?

Fund supermarkets are investment firms or brokerages where you can shop around a wide variety of different kinds of fund and fund families in one place.

They are like a catalogue for funds so you can browse around and choose the ones you want,

Costs to invest in the funds are kept so low compared to other investment routes because, like Tesco and Aldi, these supermarkets can buy in bulk and sell them to you at a lower cost than independent ‘stores’ (brokers).

Through fund supermarkets, you also get access to an extensive range of top-performing funds.

Investors like to use them because of the variety of opportunities for investing in different asset classes, holdings and products that could be domestically-focused or international.

Whether you’re a high net-worth investor with fingers in a lot of pies or a DIY investor using a discount brokerage, you are likely to use a fund supermarket platform to access some investment opportunities.

A beginner's guide to fund supermarkets

 

How to use a fund supermarket

To start trading,

  1. set up an online account with your chosen fund supermarket. You’ll need to provide some personal details, such as proof of identity, in the registration process to prevent money laundering and fraud.
  2. When you’ve got your account, use the information provided by the platform to find the funds you want to invest in.
  3. You should be able to view current and historical performances, as well as other critical information, of any fund you may wish to invest in.
  4. You then buy the shares you want much like you would an online shopping purchase!
  5. Use your debit card to transfer money into your fund supermarket account and then complete the transaction you want.

 

Five fund investment platforms to check out

The best fund supermarket for you depends on

  • your initial investment amount,
  • how frequently you want to trade, and
  • what you want to invest in.

Some fund supermarkets, for example, may not let you purchase ETF or index trackers.

So, before you set up an account, make sure you know what investment products you want to purchase and make sure your fund supermarket offers them.

 

AJ Bell

Fund supermarket AJ Bell was founded in Manchester in 1995. The platform has grown steadily since its launch and is now, itself,  part of the FTSE 250 index, making it one of the UK’s biggest companies and a heavy hitter in the fund world.

As well as enabling investors to create their own portfolios, AJ Bell offers a range of their own nine funds

  • six which target growth,
  • two which target an income,
  • and one targeting responsible growth.

The minimum investment you can make into any AJ Bell fund is just £1.

You can also set up a regular investment, which lets you invest £25 or more each month.

Pros and cons

  • One of the upsides to investing with AJ Bell is that it is fast and simple to open an account.
  • The platforms are also easy to use, meaning getting started should be fairly frictionless.
  • AJ Bell also has a reputation for good customer service, so any bumps along the way will be easy to resolve.
  • On the other hand, you might feel held back by the limited products they have on offer. Other platforms have a bigger range of places to put your money.
  • Another issue is that the technical research tools on offer are on the basic side compared with other providers.

Costs

When you buy an AJ Bell fund, you won’t pay a dealing charge. The custody charge – what you pay for holding the investment in your account is the same as for any other fund.

AJ Bell charges on a sliding scale.

  1. The first £0 – £250,000 is charged at a 0.25% rate.
  2. This moves to 0.1% for holdings between £250,000 and £1m.
  3. The next £1m – £2m is charged at 0.05%
  4. and any value over £2m incurs no charge.

There is also an annual ongoing charge for managing the fund, which is capped at 0.35% for the six growth funds and 1.00% for the two income funds and the Responsible Growth fund.

his charge comes directly out of the fund itself and will reduce as the fund grows in size. This is because a larger fund is more affordable to manage – and it’s our policy to pass this saving onto you, the investor.

 

Interactive Investor

Interactive Investor is the UK’s second biggest stockbroker and is regulated by the FCA. It was founded in 1995, and was incorporated in its current form in 2003.

It’s a handy platform if you’re looking for a specific type of ISA or Self Invested Personal Pension (SIPP) account.

Interactive Investor has a long track record in the industry and is considered a safe bet in terms of its products and advice.

According to its website, it gives you access to more than 40,000 UK and global stocks, as well as tools and analysis to help you choose your investments if you need it.

Pros and cons

  • Investor has a slick web trading interface and fast and easy deposit and withdrawal mechanisms. It is also known to have great customer service.
  • On the other hand, some argue that it has a limited product portfolio and basic charting and analytics tools.
  • The flat fee structure might also put people off if they are looking for a more pay-as-you-go approach to managing their investments.

Costs

  • With Interactive Investor a £9.99 a month service plan flat fee gives you access to a general trading account, stocks & shares ISA and a junior ISA.
  • There are no trading fees with its regular investing service.
  • There’s a special offer on at the moment where adding a SIPP is £10 a month extra with no extra fees for taking money out of your pension.
  • Interactive Investor also offers its customers a free trade every month.
  • There are other activity-based fees for things like Stamp Duty and foreign currency exchange.

 

Fidelity

Fidelity is one of the heavier hitters on this list of fund supermarkets, as one of the biggest managers in the world. The US-founded platform is a major force in the online brokerage space.

In recent years it has streamlined its approach, increasing its focus on quality and cash management to help clients improve their returns.

Clients might choose Fidelity for its deep pool of research and resources available for investors to draw on, as well as its asset screeners which help narrow down choice.

Pros and cons

  • Fidelity has been hailed as one of the more simple platforms to use.
  • It also has a wide range of products compared to some of the others and has been praised for its high quality information.
  • The downside is that if you have a relatively small pot of cash, a £45 fee is quite high compared to what others charge.

Costs

  1. Annual costs for using Fidelity are 0.35% of your investment if you have a ‘regular savings plan’
  2. or £45 if you don’t, on anything less than £7,500.
  3. Charges stay at 0.35% for pots of £7,500 to under £250,000.
  4. It drops to 0.2% for pots of £250,000 to under £1m and stays at that level for pots of £1m.
  5. There is no service fee for investments over this amount.

he maximum fee you will pay for all of your personal accounts is £2,000 a year.

  1. Ongoing fund charges are set by the companies who manage the funds and start from 0.05%.
  2. For shares or ETFs held within a stocks and shares ISA, the annual service charge is capped at £45.
  3. It costs £10 to trade shares and investment trusts online
  4. £1.50 for deals as part of a regular savings or withdrawal plan,
  5. or for a reinvestment of income or a dividend £30 to trade shares and investment trusts via phone.

 

Charles Stanley

Charles Stanley Direct was established in 1792 and is one of the oldest firms on the London Stock Exchange. The platform provides wealth management services to private clients, charities and smaller institutions.

It is the DIY or ‘execution only’ arm of wealth manager Charles Stanley and lets investors get a look in on funds and regulated financial advice from its parent company if desired.

Pros and cons

  • The combination of low fees and rewarding loyalty schemes keeps customers coming back to Charles Stanley.
  • It is also known for being efficient and an easy service to deposit and withdraw from.
  • On the other hand, if has a limited product portfolio, poor research and information for investors and basic research tools.

Costs

  1. Charles Stanley charges 0.35% a year on your first £250,000 of funds held across all your accounts.
  2. That drops to 0.2% when your funds reach between £250,000 and £500,000.
  3. There is a 0.15% charge on funds between £500,000 and £1m and a smaller charge of 0.05% when you’re investing between £1m and £2m.
  4. Funds over £2m incur a 0% fee — alright for some!
  5. The annual fee for your share holdings is waived each month you trade shares. Trading every month will cap fees at £138.
  6. Meanwhile, trading charges tot up to £11.50 per trade to trade stocks and shares online. There is free trading for funds.

 

BestInvest

Bestinvest is a platform that provides execution-only services, primarily to private investors, including ISA and pension options.

The website has guides and investment research available and a range of ready-made portfolios and pre-packaged investment choices on offer. It also has funds from different groups and individual company shares.

There’s a fair bit of technical information and fund research, so it’s more likely to suit those that are more experienced.

Pros and cons

  • Bestinvest fees can seem high compared with other providers, and for people with a high value portfolio it might be better to go with a provider with a fixed fee.
  • It is, however, relatively cheap for those with a portfolio up to £10,000.
  • There is also lots of information provided on the website about what products might be best for you.
  • It’s known for having good customer service and Bestinvest will cover your transfer fees.

Costs

  1. The minimum buy-in is £50 for most funds on Bestinvest
  2. There are also tiered service fees starting at 0.4% a year on investments of up to £250,000.
  3. That drops to 0.2% on investments between £500,000 and £1m.
  4. Anything over £1m is free to hold.
  5. Share dealing costs £7.50 per trade and telephone orders are priced at £75 per deal.

 

Expert insight on investing!

A beginner's guide to fund supermarkets

Jasmine Birtles’ MoneyMagpie webinars are the perfect place to learn about investing from industry experts, and give you the confidence to start investing your cash. You will learn how to get yourself ready for investing, how to save and how to invest like the City guys!

Some of the topics covered include:

  • how to weigh up risk and reward when considering income-bearing investments
  • dividend-bearing shares and funds
  • bonds and gilts
  • savings accounts
  • peer-to-peer lending platforms

You can bring any questions you like – none are too dumb – and Jasmine will also point you to websites and services that can give you more help and information.

Keep an eye out on the website or social media channels for what’s coming up next.

 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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