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11/22/00 03:46:05 PM PST
by Jayanthi Gopalakrishnan

Here's a brokerage that gives individuals the opportunity to invest in a basket of stocks, even with limited funds.

The growth of the Internet opened up several possibilities of low-cost investing and easier methodologies to manage money. But former SEC commissioner Steve Wallman felt there could be a better way to invest. With that in mind, he founded, a brokerage that gives individuals the opportunity to invest in a basket of stocks, even with limited funds. " provides investors with the opportunity to easily and affordably own a diversified stock portfolio," commented Nancy Smith, vice president of Web content at

FIGURE 1: FOLIOfn.COM. This online brokerage gives you the option to invest in a basket of stocks or folios. By investing in folios, not only do you reduce risk through diversification, but you have control over your investments.

While it is true that diversification reduces your investment risks, it can be costly for an individual to purchase several stocks. Because of this, many opt to purchase indexes, exchange traded funds (ETFS), or mutual funds. Unfortunately, when you invest in any of these, you don't have the option of deciding which stocks you own; the control is in somebody else's hands. But with the introduction of, you have the option of diversifying your portfolios and controlling your investments, making it a hybrid between mutual funds and owning individual stocks (Figure 1). This concept is what attracted me to


Selecting your own folio or basket of stocks is an interesting experience; there couldn't be an easier method. There are approximately 90 ready-to-go folios divided into the following groups:

  • Major market
  • Investment style
  • Risk-tailored
  • Sector
  • Social issues
  • Special
  • Geographic
  • Wall Street analysts
  • Bond
  • Media favorites.

  • Details such as the selection process for these folios can be easily accessed on the Website. In addition, you have the option of creating your own. If you opt for the ready-to-go folios, you should run through the folio wizard and answer a series of questions to determine your investment style and risk exposure suited to your needs. Based on your answers, you will see a list of recommended folios. Each of these folios can be analyzed using several of the analytical tools available. I especially liked the backtesting tool, which shows the performance of the selected folio against a benchmark (Figure 2). Unfortunately, the benchmarks are currently limited to the Standard & Poor's 100, 400, and 500, Nasdaq, and Dow Jones Industrial Average (DJIA). So if you wanted to compare a bond portfolio against an appropriate benchmark, the available options wouldn't reveal anything significant. However, you can compare it against a mutual fund with similar strategies and style. But you can't do the fund screening on Foliofn's site. You have to go to an external site to conduct this research.

    FIGURE 2: BACKTESTING. Before purchasing your folios, you can compare them against a benchmark to determine their performance.

    In addition, you can also see the sector weightings of your portfolio and fundamental statistics such as price/earnings, price/sales, price/book, market capitalization, volatility, and beta against the available five indexes.

    If a folio contains any stocks you don't wish to own, you have the flexibility to add or delete securities and change the folio's asset allocation (in dollars or shares). When you have created folio(s) you are satisfied with, you can place them on a watchlist and monitor their performance. Any time you are ready to purchase it, you can go ahead and place the trade.


    Placing trades is simple, and the guided tours are nicely laid out and clearly explained. You have the option of placing an easy trade or an advanced trade. The advanced feature gives you the opportunity to rebalance your folio, buy and sell specific stocks, implement dollar-cost averaging, and exchange folios. Before placing trades, you can see your short- and long-term gains displayed. These are based on the prices and the tax lots you are selling.

    The tax lot feature is worth mentioning. When you purchase shares, you can select a tax lot. The choices are:

  • First in, first out
  • Minimize gain or maximize loss
  • Minimize long-term gain
  • Minimize short-term gain
  • Maximize gain or minimize loss
  • Last in, first out
  • Maximize long-term gain
  • Maximize short-term gain.

  • This option lets you sell the tax lots that give you the best tax treatment.

    The downside of Trades are currently limited to 2,500 stocks, and trades are executed twice a day at 10:15 am and 2:45 pm. You can place a trade that goes directly to the market, but this will cost you $14.95 in commissions per trade. Where possible, trades are matched internally to eliminate the spread between bid and ask prices, thus giving Foliofn customers the best price possible. If a match can't be made, the order is sent to the market.


    The fee structure of is different from that found at traditional online brokerages. An account holder at can create or buy up to three folios for a flat fee of $29.95 a month or $295 a year. Additional folios are $9.95 per month or $95 a year. This flat fee covers all your trading during the twice-a-day windows. Free checkwriting is also available to members, and if you own more than six folios, you receive a free ATM/debit card. You may opt to deposit a certain amount each month.

    An initial reaction to the fee structure may be that if you don't make that many trades in a year, this flat fee may not be worth the price. Take a look at the cost calculator, where you can enter the information on the amount you spend on your current investments and compare it with what your expenses would be if you utilized the flat-fee structure at

    CONCLUSION has gone to great lengths to make investing a simple process. They have a well-designed site with a wealth of content. They have simplified the entire investment process and taken the fear out of managing your money. Whether you can manage your money, however, is a question only you can answer. I recommend taking advantage of the 30-day trial period to determine if is right for you.

    Jayanthi Gopalakrishnan

    Staff Writer

    Title: Staff Writer
    Company: Technical Analysis, Inc.
    Address: 4757 California Ave SW
    Seattle, WA 98116
    Phone # for sales: 206 938 0570
    Fax: 206 938 1307
    E-mail address:

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