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Folio Investing Review

Folio Investing allows you to open various retirement accounts, personal accounts, business accounts and more, while giving you options of Ready-to-Go folios in hundreds of assets.

securely through Folio Investing's website

1 Minute Review

Folio Investing advocates a smarter, long-term investing approach, with diversified, customized, goal-oriented investing rolled all in one tight bundle. It offers low costs, consistent investing and tax minimization. You can reach your investing goals and diversify with Folio investing by using its custom-made Ready-to-Go Folios (RTGs), by creating a portfolio on your own or combining your portfolio with RTGs. You can use the Folio Unlimited Plan and to lower and fix your annual costs right at $290.

Best For

  • Investors of all skill levels
  • Goal oriented investors
  • Buy-and-hold investors

Pros

  • Offers portfolio ideas
  • Cost reductions
  • Fractional shares
  • Tax optimization
  • 60-day trial

Cons

  • Not the cheapest robo advisor
  • Orders are not executed immediately

Why is Folio Investing pretty great? Not only is Folio easy to use, it’s pretty easy to create an account.

To create a portfolio, you have to use a folio, a virtual basket that can contain up to 100 assets such as stocks, ETFs and mutual funds. You can have as many folios and as many accounts as you’d like. More than one folio enables you to follow and analyze the performance of different ideas or strategies.

Once you create an account, you'll get dozens of portfolio ideas

It’s pretty easy to create a portfolio with Folio Investing, even if you don’t know what to buy. There are over 160 available portfolios to choose from and they are all based on specific ideas. They are called Ready-to-Go Folios (RTGs) and some of the ideas that you can follow with them are:

  • Target date RTGs
  • Strategy RTGs
  • Sector or industry RTGs
  • Fundamental RTGs
  • Geographic RTGs
  • Investment style RTGs
  • Market index RTGs (and more!)
  • You can also follow third-party ideas, but they might require subscriptions

IPO Candy is an interesting example of an RTG Folio. It’s a selection of 10 to 20 recently-listed stocks. Tiny Titans 101 is an aggressive micro cap strategy portfolio.

If you want a dividend-paying portfolio, you can choose the Dividend Yield Folio RTG. With Target RTG Folios, you can plan for college, retirement, a purchase of a house or any other future goal, while the Mid-Cap Growth Folio offers investors aggressive long-term capital appreciation with higher volatility.

The mid-cap stocks have a market capitalization between $1.7 billion and $11 billion and in the Mid-Cap Growth Folio, you can find medium-sized companies with attractive growth prospects.  

A sampling of Folio Investing's Asset Allocation RTGs Source: FolioInvesting.com
A sampling of Folio Investing’s Asset Allocation RTGs Source: FolioInvesting.com

What's does Folio Investing cost?

Folio Investing uses window trades and offers two investing plans to clients, the Basic Plan and Folio Unlimited Plan. Window trading was designed for long-term investors and it is a patented way of executing orders. The orders are not executed immediately. Instead, they’re grouped one or more times per day and then executed.

If you decide to use the Basic Plan, you’ll pay $4 commission per window trade per security. There is a $15 per quarter fee for investors that hold securities and make three or fewer trades in the preceding quarter.

The Folio Unlimited Plan offers 2,000 commission-free trades in twice-daily trading windows and a fee of $29 per month. Rebalancing is free, which can decrease your costs and improve your long-term return.  

You can buy in fractional shares

Consistent investing is one of the features of Folio Investing, as is using a buy-and-hold approach. The idea is that stock picking doesn’t work and investors usually sell at the wrong time (when the market declines) and buy when they shouldn’t (when the market moves upward).

When you buy securities, you can buy them in dollar amounts, shares or fractional shares. This allows you to use diversification to your advantage. This way, you don’t have to leave any cash in your account just because you can’t afford to purchase a full share.

This is great when you receive dividend payments or when you periodically add money to your account. It allows you to keep the portfolio weights unchanged and also makes it easier to rebalance your portfolio.    

It'll optimize your taxation

The broker also provides comprehensive tax lot accounting and 10 automated tax strategies for selling securities.

With its patented tax tool, Tax Football, you can identify the securities that can be sold to achieve specific tax results. It can also be used to harvest tax losses, to generate gains to offset losses and you can even try to raise cash with no tax at all.

Robo tax loss harvesting is an automated process of selling securities and substituting them with similar, correlated stocks. You sell a stock, realize the loss and you buy a similar stock that should in future trade in correlation with your stock. The realized loss offsets capital gains or taxable income.  

This it's for you? Get a 60 day trail

In the first 60 days after funding an account, you won’t have any charges. If you don’t want to continue after that period, you can simply close the account with no obligations.

After the 60-day period, depending on the plan you choose, your first trading costs will appear.

Downsides of Folio Investing

Folio Investing does make it easy for its users, but here are few downsides. Before you open an account, consider the following.

There are cheaper options available

Although Folio Investing is relatively cheap, there are similar robo advisors which are even cheaper. Some even charge $0 in fees. M1 Finance is an example, as it offers similar services completely free.

No guarantees for past performance

Obviously, there are no guarantees that RTGs are going to continue to perform. Even the best strategies have periods when they have negative returns in some periods.

If they really work well, they should recover from the temporary losses in the long term, but you can never know for sure as market rules might change.

Orders are not executed immediately

Window trading allows you to lower costs, but it executes trades only twice a day. When markets move sharply, you might miss some opportunities to buy cheap and might not get the best price.

Sometimes, the market can open sharply lower and recover immediately after the opening. If you are using window trades, you won’t be able to buy when you see these sharp declines.  

Final thoughts

According to Folio Investing’s website, the average investor loses 2.5% each year buying and selling at the wrong time. If you find yourself timing the market, chasing winners, buying fads and are starting to become uncomfortable with that, consider a change-up.

There’s a reason dollar-cost averaging and periodic rebalancing are hot for the long-term, and Folio Investing just might have your answer.