Folio Investing
A Unique Discount Broker
- NO LONGER AVAILABLE -

2020 was a big year for Folio Investing.  First, they acquired the accounts of Motif, the only other brokerage that allowed retail investors to manage investing strategies as distinct folios when Motif shut down.  Then, they were bought by Goldman Sachs who eliminated any access by retail investors.

The following is our last review.  We are retaining it for reference in case we can locate a comparible product.

Last Published Review - May 2016

Folio Investing (aka FolioFN) satisfies one of the core needs of investment strategy development - forward testing with skin in the game. Paper trading to track strategy performance should be a thing of the past. There is simply no other discount broker who meets this need with anywhere near the convenience or cost.

Imagine an online broker where you can track an unlimited number of investment strategies with real money for a minimal annual fee provided you make no more than 2000 trades per month. Yes, 2000 trades per month instead of per trade fees. You can even track additional strategies as test cases without investing any money. But the test cases are hypothetical and really no better than paper trading in a simulator or screener.

Cost

The low cost is possible by making all trades in one of the 2 daily trading windows. It eliminates the per trade cost if you are willing to be part of the "window" trade.

At Folio Investing, each strategy you want to implement is referred to as a folio. In addition to making your own folio, there are also pre-defined folios you can follow. For example, StockScreening101 publishes the Tiny Titans strategy as a pre-defined folio.

Features

Below are some of the features we think differentiate Folio Investing from other discount brokers:

• Add or reduce the amount invested in a strategy at any time: Whether you are testing a strategy you created or initiating a subscription to a model, you can start with a minimal amount because you can buy partial shares. Once you are satisfied with the strategy, you can add money to the strategy with a few clicks. Reducing the amount invested is just as simple.
• Experience the ups and downs of a strategy with little or no financial risk: Being able to track unlimited strategies with real money allows you to test variations of a strategy side-by-side.
• Diversify without needing a significant sum of money to invest: With unlimited folios you can create the allocation and diversification mix you need.
• Rebalance when necessary: You can rebalance to equal weighting, pre-determined weighting, or cap weighting at any time.
• Hedge without using margin: Since you can adjust the weighting of each holding in a folio by percentage, hedging is simply a matter of adding the hedging instrument and changing the weighting. Each folio can be hedged individually.

Performance Stats

One of the frustrations of mixing strategies at the typical discount broker is the extra work required to track the performance of each strategy. Not a problem at Folio Investing. Not only do you get the actual trade reports, you are able to track the equity curve of each folio against a benchmark. The following is the performance graphic of one of our personal strategies:

Notice that it doesn't matter if we tested with $100 or $100,000, or adjusted the dollar amount at any time. The annual flat fee covers the cost and partial shares will be used to balance each company in the folio to the desired percentage. In any case, there is no performance hit based on the number of trades or the amount invested (unless you exceed 2000 trades per month).

What to avoid

There are some situations where this discount broker is not the solution.  For example, if you are day trading, the window trading is just not going to do what you need. It may be that the individual, non-window trades could work, but there are online brokers with the exceptional real-time support you need.

Options, forex and short-selling are also not going to work. Likewise, if you are focused on thinly traded or penny stocks, you may be better served to use another discount broker.

Try Folio Investing for free for 60 days

You can try this approach free for 60 days before committing to the annual fee. To learn more, check out the Folio Investing site.

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