There's much to like about investment supermarkets like Schwab's. They allow investors to graze among individual stocks and bonds, as well as mutual funds and exchange-traded funds. Supermarket investors can build portfolios composed of investment products from many different firms, but yet receive a single statement and trade on a single platform. By offering distribution, supermarkets have also arguably allowed small investment managers to gather assets (which can bring down total costs) even though they have little distribution muscle of their own.
Yet, just as the big brand-name cereal makers have to pay for eye-level placement on your grocery store shelves, mutual funds, too, have to pay for placement in a fund supermarket. To gain access to a supermarket, mutual funds have to pay, and those fees usually show up in the form of a 12b-1 fee.
Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.