Review of: Folio InvestingReviewed by: Kevin MercadantePublished on: May 27, 2019Last Modified: May 27, 2019

Editor Rating

Use Folio Investing to set up a basket of funds and stocks, or "folios" customized to meet your specific investment needs.

As an investor, you want to build a portfolio based on your own particular investment strategy and long-term goals. Luckily, with the advent of robo advisors, it’s easier than ever to do just that. One company, Folio Investing, is making it easy for investors to build customized portfolios.

What is Folio Investing?

Folio Investing, also known as FOLIOfn, is an investment platform that provides investing and portfolio management which allows customization as well as tax and cost management benefits. It combines investing in mutual funds and exchange-traded funds, with individual stocks, in what it calls folios.

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Based in McLean, Virginia, Folio Investing is a privately held company that was founded in 1998 by Steven Wallman, a former commissioner of the Securities and Exchange Commission.

Officially, the company is FOLIOfn Investments, Inc., which is a wholly owned subsidiary of FOLIOfn Inc., a company that provides investment technology, management consulting and other services to the financial services industry sector.

How Folio Investing Works

The platform is based on folios, which is a special basket of securities with specific features provided by Folio Investing that can be either managed or unmanaged by the platform or other third parties. In short, it’s a basket of funds and stocks customized to meet a specific investment need.

Each folio — whether one provided by the platform, or one you design yourself — can contain up to 100 individual securities, which includes stocks, mutual funds, and ETF’s. You can have an unlimited number of folios in your account, and those folios can even include fractional shares. And under the company’s Folio Unlimited Plan, there are no commissions for buying, selling, or modifying your folio.

The platform offers what it calls Ready-to-Go-Folios, and there are over 100 of them. Each is built around a particular investment strategy, and they’re basically designed to help you get started investing through the folio method.

Once you are comfortable with the concept, you can move on to Build Your Own Folios. This is a custom portfolio that you build yourself based on your own investment preferences and strategies. The folio can include as little as one stock, or as many as 100, including mutual funds and ETF’s.

You can also customize your folios as you go forward. You can do this by allocating dollars equally across all of your holdings, using market cap weightings, or even customize each security weighting.

Features and Pricing

The use of folios enables you to do at least some of the following on the tax front:

Decide the best way to manage your tax lots (they offer 8 automated tax lot options) Control the timing and tax implications of your folio transactionsSelectively sell off poorly performing securities to offset taxable gainsDefer taking gains; harvest tax losses insteadMatch winners with losers to avoid incurring taxes at allSell the highest cost tax lots to minimize taxes

They also offer specific tax management tools to help you handle the income tax side of your investment life. When you sell a security they automatically sell the tax lot that best matches one of the eight automated tax lot options that you choose for your account.

All gains and losses are then downloaded into popular tax software programs, such as Quicken, TaxAct, Microsoft Money, and Tax Cut.

Folio Investing will also provide complete records for both short-term and long-term gains and losses, for income tax purposes.

Folio Investing offers two pricing options, the Folio Unlimited Plan and the Basic Plan.

The Folio Unlimited Plan (recommended for a portfolio of at least $20,000) fees are:

Unlimited Commission-Free trades in twice daily trading windows$3 market, limit, stop and stop/limit ordersNo investment or balance minimumsAnnual fees: $29 per month or $290 per year, with 60 days freeUnlimited access to 100+ free Ready-to-Go Folios and Unlimited Build Your Own FoliosUnlimited personal and retirement accounts (one fee covers all your accounts; personal, joint, retirement, custodial, revocable trust and more)

The Basic Plan (recommended for smaller and/or less active traders) fees are:

$4 commission per window trade per $3 market, limit, stop and stop/limit orders$10 market, limit, stop and stop/limit ordersUnlimited access to 100+ free Ready-to-Go Folios and Unlimited Build Your Own FoliosNo investment or balance minimumsUnlimited personal and retirement accounts (one fee covers all your accounts; personal, joint, retirement, custodial, revocable trust and more)$15 per quarter service fee, if 3 or fewer trades in the preceding quarter

Under either plan, there is a $25 annual fee for IRA accounts.

Types of Accounts Offered by Folio Investing

Folio Investing offers a wide variety of account types to choose from. For general investing, they offer the following accounts:

IndividualJoint (multiple)CustodialTrustBusiness (For legal corporations, professional associations, or professional corporations)Investment club

On the retirement front, they offer the following account types:

Roth IRATraditional IRARollover IRASEP-IRASIMPLE IRA

Folio Investing Tools

Folio Investing offers the following tools — and this is just a sampling:

Virtual Stock Trading Account. Also referred to as a “Watch Account”, you can use the folios in this account to test strategies without using real money. The account uses the same trading screens and tools that funded accounts do, and once you feel ready to go live, you can convert the account to a real account with a few mouse clicks.

Market Research. This is stock market research powered by Quotemedia. This provides charts, financials, company information, historical quotes, and other information, very similar to what you would find on a site like MarketWatch.

Performance Reporting. This tool enables you to view the performance of your investments over any time period against popular benchmarks, such as the S&P 500 or even against individual security or fund.

Earlier we talked about Ready-to-Go Folios, the prepackaged folios offered by the platform to investors who are not yet comfortable creating their own folios. The platform offers various types of investment folios, including:

Target date foliosLow volatility foliosAsset allocation foliosBond foliosFundamental foliosGeographic foliosInvestment style foliosMarket index foliosSector/industry foliosStrategy folios

Those are just the general categories of folios — under each category you’ll have a choice of several folios that are even more specific. There are more than 100 individual Ready-to-Go folios to choose from.

The Good

Why might you be interested in investing your money in folios, rather than simply doing it through mutual funds and ETF’s?

Folio Investing offers the following:

Ready-to-Go Folios that you can use as is or modify — many with very strong track recordsYou can easily also follow someone else’s recommendations such as a newsletter, a website or perhaps a strategy of your ownBuild unlimited Folios with up to 100 stocks, mutual funds, and ETFs eachYou can have as many Folios as you want in an account, and invest commission-free with the Folio Unlimited PlanThe platform helps you determine what kind of investor you are — and what asset allocation might be right for you — based upon your answers to six straightforward questionsTheir Window Trading system enables you to buy fractions of shares and invest with any dollar amount. Example: Spread $500 or $5000 across a whole FolioThe Folio Unlimited Plan gives you all this for one low flat fee, allowing you to diversify cost-effectively and simply

The Bad

There aren’t many downsides to Folio Investing. The pricing is reasonable and it’s great for investors who like to customize their portfolio or want something that is ready to go. Folio Investing might not be ideal for investors who want a lot of direction and assistance.

Summary

Folio Investing offers a comfortable blend of prepackaged investment folios, plus the ability to create and customize your own folios. This can be the perfect mix for the person who wants to control his or her own investment strategies, but also wants the option of having access to broker prepared investment packages.

The transaction and account fees are reasonable for the program offered, and the platform has been around much longer than most of its competitors. The fact there are no minimum upfront or balance requirements is also a major advantage for the new or small investor.

If you’re a self-directed investor, but one who still feels the need to rely on broker assistance from time to time, Folio Investing could be the right platform for you.