Investors prefer investing across different mutual fund families since a single family rarely has top performers in all of the available fund categories. Mutual fund supermarkets are a solution that allow investors to accomplish this goal.
Investors can choose many funds from different families, but still own them in one brokerage account through fund supermarkets. Investments can be tracked easily with consolidated reports from the broker.
Some of the best no load, no-transaction-fee (NTF) funds from different categories such as UMB Scout International, Matthews Asia Pacific Tiger, and American Century Equity Income can be accessed by investors to construct diversified portfolios.
As investing styles come in and go out of favor, any single fund is unlikely to stay as the top performer for all times, however well managed it is.
For example, domestic funds in the small cap growth category, which led the pack in 2010, have gone out of favor in 2011 while large cap growth funds have emerged as leaders.
By providing access to funds investing in different styles, regions, or countries, fund supermarkets allow investors to employ active management strategies such as style rotation or country rotation that can help to reduce losses and increase returns.
One of the common gripes investors have about fund supermarkets is the long holding period required to qualify for commission-free trades of certain no load funds... more so in volatile markets where stock price changes that would normally take several months or years to materialize transpire in just a few days.
Fidelity Lowers Minimum Holding Period Requirement
Responding to investor's preferences and concerns, Fidelity has reduced the minimum holding period required for commission-free mutual fund trades in Fidelity's FundsNetwork from 180 days to 60 days.
Fidelity has leapfrogged the competition in providing a less onerous holding period requirement for commission-free mutual fund trades. Ameritrade (AMTD) for example requires 180 days while Schwab (SCHW), E*Trade (EFTC) and Scottrade require a 90-day holding period.
It remains to be seen if competitors catch up to Fidelity's less stringent terms.
Fidelity's rule change significantly improves the attractiveness of style, region, and country rotation-based portfolios like AlphaProfit's Fidelity no transaction fee (NTF) growth model portfolio that helps investors invest in the right mutual funds at the right time.
Strategies like style, region, and country rotation can be applied more frequently due to the reduction in required minimum holding period.
When small investors make changes after start up, the lower minimum holding period requirement considerably reduces their possibility of incurring bothersome brokerage commissions in their accounts.
Sam Subramanian PhD, MBA edits AlphaProfit's Premium Service Newsletter that is 12-time winner of Hulbert Financial Digest #1 rank. He blogs on topics like Mutual Fund Picks for 2012 and Fidelity Investments Newsletter.
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