Reasons to invest your Stocks and Shares ISA through a Funds Supermarket

Since the introduction of the ISA in 1999 as a tax free investment method in the UK, more and more people have adventured towards stock market investments. Unit Trusts and OEICs remain one of the most popular ISA investment methods into the stock market.

Unit trusts and OEICs are relatively straight forward ISA investments for a private investor. The investment decisions in a unit trust or OEIC is made by investment professionals, who have good access to a variety of information.

The manager of the fund determines what shares he or she should purchase within a given investment criteria. A typical example would be a fund manager responsible for a UK Growth fund can only invest predominantly in UK stocks. However, some margin exists to invest in international stocks.

Unit Trusts and OEICs can be bought through various fund managers such as Fidelity, Henderson, Jupiter, Aberdeen and Neptune asset managers. The investments then can be wrapped in an ISA enjoying its tax benefits. An ISA is exempt from capital gain tax. Any income generated from an ISA is also not taxable.

While it is possible to invest directly with the fund managers, it makes a great deal of sense to invest in these managers through a Funds Supermarket. Simply put a Funds Supermarket is where you can invest in a selection of funds from various managers.

If you decide you wish to invest your ISA entitlement for this financial year in a stocks and shares ISA, you would be limited to a single provider. Approaching a Funds Supermarket provides you with an ability to invest some of your money with many funds from many managers in a single financial year. So for example you can mix funds from Fidelity with the funds from Henderson and Aberdeen asset managers providing your total investment stay within the ISA allowance. This is one of the main reasons for using a Funds Supermarket.

Funds Supermarkets are very competitive. Most of them provide significant discounts on the initial charges of the investment. Initial charges typically stand around 5%. However, a Funds Supermarket provider such as Hargreaves and Lansdown reduces these initial charges to less than 1%. So, your money works hard right from the start.

Another benefit of Funds Supermarkets is the ability to have all your funds with various investment companies in a single account. Therefore, instead of an endless supply of statement from various providers, you will receive a single set of accounts from the Funds Supermarket provider. This makes it easier for you to track your investments.

It is also not unusual for fund managers themselves to offer a Funds Supermarket service. Fidelity Investments with their Funds Network is such a provider. Some Funds Supermarkets are however limited for investments that only come through a financial adviser. Cofunds, is such a Funds Supermarket.

Some providers may merge Unit Trust and OEIC investments with the ability to deal shares as well. Therefore, in a single ISA year you can have a selection of investments including Unit Trusts, OEICs and Shares. TD Waterhouse is such a provider.

Funds Supermarkets also provide a very good supply of information including their own analysis on investments. They are more than likely to be neutral about the whole market even spending time on analysing the performance of various funds. Hargreaves and Lansdown provide a regularly updated Wealth 150, which rates the top 150 funds. They also regularly conduct interviews with Fund Managers for their thoughts and views.

Another benefit a funds supermarket offers is the ability to change a fund from one provider to another, while maintaining your geographical breakdown. You may have 10% of your money invested in North America through a single fund. However due to poor performance of the manager, you may wish to change it to another provider, but remain invested in North America. A Funds Supermarket makes this possible. With a single provider it is likely you would have to change your investment from North America to a different region or a different market segment unbalancing your portfolio.

Overall Funds Supermarkets are a positive step for modern investors. However, risks of investing remain unchanged whether you invest directly or via a Funds Supermarket. Therefore, appropriate advice must be taken from a financial professional. It should also be noted that your investments can go down as well as up in value. It is also possible that you may get back less than what you invested.