A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Friday, July 08, 2005

A Review of FOLIOfn

If you are like most people you probably haven't heard of FOLIOfn. For the right kind of investor, FOLIOfn can be an awesome tool. FOLIOfn is an online brokerage firm that allows investors to construct portfolios (called "folios") of stocks and exchange-traded funds. When constructing the folio, you pick the allocation for each security.

For example, say you wanted to invest an equal amount in each of the Fortune 40 I talked about in my last post. You would simply give each security a 2.5% allocation. Once the folio is set up, FOLIOfn makes the trades for you in what is called a "window trade," which is a process by which FOLIOfn matches buyers and sellers internally. Windows trades are done at no additional charge. Speaking of charges...

FOLIOfn Fees

FOLIOfn offers four different platforms: Basic (does not allow folios), Bronze, Silver, and Gold. The Bronze and Silver accounts allow one folio. The Gold allows up to three folios. You can view the differences between the accounts by clicking on the link above. Personally, I would like to see FOLIOfn allow more folios. It would make allocation much, much easier and would also make tracking performance against benchmarks much easier.

The different plans have different fees attached to them. The Basic account has $14.95 market trades and $4 window trades. If you don't make at least 4 trades per quarter, there is a $14.95 "account maintenance" fee. The Bronze account also has $14.95 market orders but has 200 free window trades per month, but also charges $19.95 per month or $199 per year. For $29.95 per month (or $299 per year), the Silver account has $3.95 market orders and up to 400 free window trades per month. Finally, for $39.95 per month (or $399 per year), the Gold account gives you 10 free market trades per month and up to 600 window trades per month.

FOLIOfn probably isn't the best choice for small investors. $199 per year on a $10,000 account works out to a 1.99% expense ratio. That's pretty steep. I would only recommend FOLIOfn if the total fee is less than 1% per year. At the Bronze level, you would need around $20,000 ($199/.01 = $19,900) to keep the fees to less than 1% of the portfolio's value.

Final Thoughts

Overall, I think FOLIOfn is a great alternative to the other brokerage firms. I like the folio concept. I just wish they allowed up to 10 folios instead of just the one (or 3 if you opt for the Gold account).

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