What is a Fund Supermarket?

Jim B.

A fund supermarket is another name for an investment firm or other institution that allows its customers to choose from a large variety of mutual funds. It is likened to a supermarket because it attempts to satisfy all of the diverse needs of an investor in a single place. In many cases, a fund supermarket allows an investor access to hundreds of mutual funds. Investors thus are afforded great portfolio diversification while streamlining their investments to a single source.

Man climbing a rope
Man climbing a rope

Mutual funds, which pool investments from multiple investors who then share in the profits or losses of the fund, are a primary method by which investors diversify their portfolios. Gaining access to such funds can be a somewhat complicated process for investors, especially when the funds are provided by many different fund companies that have their own distinct fees and accounting practices. As a one-stop shopping center for investors, a fund supermarket can provide all of the desired diversity while cutting out much of the complication.

In a fund supermarket, the investment firm acts as the market and the different funds which the investment company acquires as sponsors are the goods. The investor thus has access not only to funds associated with that particular firm, but also to mutual fund families from other fund companies. Many of the funds included in a supermarket are so called no-load funds, or funds in which all of the investor's capital goes toward the investment in question without any attached fees.

There are many advantages to investing with a fund supermarket. Investors get the benefit of multiple investment strategies and can have access to funds that might be too expensive on their own. In addition, the diversity provided by all of the mutual funds provides a good buffer against risk for investors. If a few of the fund families within the supermarket are underperforming, there will still be many that are doing well and, ideally, growing the capital within the investment.

Keeping track of investment opportunities is also much easier for an investor when all of the potential funds are managed and administered by a single source. Some fund supermarkets may even offer tax-reporting services to make life even easier for the investor. In addition, investment firms will often offer the funds that they manage themselves at a reduced rate within the supermarket, allowing investors to get a bargain. Investors should research the funds available from a specific supermarket to see if it's the right fit for their budget and their investment needs and goals.

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