Foliofn

[WTMHouston]

Len:

I did not envision that this platform would be beneficial for day traders -- although $4 a trade is still a pretty darn good rate. Rather, it seems like a way to self diversify into 50-150 different stocks and to have the ability to trade each of them several times a month, whether for money management purposes or through increased investment money availability (dollar cost averaging) without getting killed on commissions.

For example, let's say someone has a $40K stake to invest (and I use that number simply because the $400 annual fee for up to 3 "portfolios" of up to 50 stocks each is 1% of the $40K). Let's also say that they want to add to this at the rate of $1K a month. Obviously spreading $1K over even 100 stocks ($10 each) in two to four separate purchases a month (200 to 400 trades -- 300 to 600 trades at 150 stocks) could add up to some hefty commissions in the regular brokerage context and would be cost prohibitive. This program, it seems, allows that to be accomplished for now more than the $400 annual fee.

Historically, a small investors only way to significantly or meaningfully diversify was through mutual funds managed by others at whatever load and expense ratio they happened to charge or incur. This allows the regular (small) investor to essentially put together their own mutual funds -- but to own the stocks directly. It allows them to own only the stocks within a basket (say the Dow 30) that they want to own without having to own the ones they do not want to own.

They seem to have two categories of stocks -- those they call window stocks (4000 of them, which are probably the 4000 most actively traded stocks) and all others. Only the 4000 window stocks may be traded within or are limited to the program's included 600 trade per month cap. These stocks are traded twice a day (11:00 a.m. and 2:00 p.m., if I recall correctly). They trade at either a split of the bid-ask at that time or at the market price at that time (if they have buyers and sellers within the system for the same stock it trades at the midpoint of the bid-ask spread at that moment -- if there are not buyers and sellers within the system (something I would not count on), the rest trade at the market.

Stocks outside of the window stocks trade like normal stock trades. Trading in the windows does not prohibit trading at any time with traditional market orders. The $400 a year program also includes 10 free market, limit, etc., trades a month and then the excess at $3.95 each. For most people, who are not day traders, this quantity should be more than sufficient for larger block trades. I will admit that it may not be for actively trading thinly traded BB or pink sheet stocks, with which I have little experience, but regular trades are regular trades and massive spreads are still massive spreads regardless of who the broker is. Even for active day traders, the average trade cost will still be less than $4 a trade.

As far as the company, they have SIPC coverage as well as excess coverage -- $9.5M if I recall correctly. The CEO is Steve Wallman, a former SEC commissioner. More on it here: http://www.foliofn.com/content/retailcontent/about_basic.shtml

I found them as a result of a marketing partnership (my characterization) they have with Reuters.

Here are a couple of recognition items:

Money
Money Tech 2000, Heroes: 10 Unsung Champions of E-finance
October 2000
FOLIOfn Founder and CEO Steve Wallman is named to Money Magazine's list of 10 unsung leaders in the world of E-finance. "Says Wallman: 'We want people to rethink the way they invest.'"

Fortune Small Business
25 Hot New Companies
May 2000
FOLIOfn is named to Fortune Small Business' annual list of 25 companies with breakthrough products, services, and technologies.
"Wallman has the vision thing ('We want to change the investing world,' he says) and several additional online products in the works. Move over, Mr. Schwab."

More at this link: http://www.foliofn.com/content/press/press_awards.shtml

They have an impressive list of business partners and investors (including Advent and American Century):
http://www.foliofn.com/content/retailcontent/about_partner.shtml

The one thing I am not worried about is the security of my money -- unless I have missed something.

The attraction for me is the ability the self diversify without incurring massive commission costs. I know of no one else who does this.