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Foliofn is a company I stumbled upon maybe six years ago.  Who are they and why should you care?  This is a great company, in my opinion, for mutual fund investors that want to get a little more involved in the process.  In a nutshell, mutual funds represent a group of people that have collectively invested their money to buy a group of stocks.  These stock purchases and investments are managed by companies or licensed individuals that have the time and knowledge needed to effectively make money for the investors.  Well, we hope so.  

Mutual funds may invest in the stock of 20 to 40 different companies.  There may be 100 shares of Company A, 300 shares of Company B and so on until their is a portfolio of stock selected based on the goals of the fund.  The fund manager may buy the stock for Company A at a cost $30 a share, while Company B may cost $15 a share.  When all of these company stocks come together in a mutual fund portfolio, you no longer see the price of the individual stocks.  At this point, you buy into the fund based on the net asset value (NAV).  There is a formula used to calculate the NAV, but it really isn’t important for you to know.  What you need to know is that, one share of this professionally selected portfolio of stock will cost you the specific dollar amount of the NAV per share at the time of entry.  This NAV will fluctuate with market conditions just like individual stocks will.  

Now here in lies the beauty I see in Foliofn.com.  Some mutual funds charge huge fees to get in, while some charge none.  There are mutual funds most people never hear of that produce returns far beyond that of the overall market.  Unfortunately, they may require a $500,000 initial deposit.  For anyone willing to do the time and research, the Foliofn payoff could be huge.  With this account, you now have the ability to find the top producing mutual funds despite their entry cost and make the same investments they do.  

Let’s say the Big Timer Mutual Fund has had an average annual return of 75% over the last 5 years, but require an initial deposit exceeding your budget.  Even though we’re always warned that past performance is no guarantee of future performance, it is a pretty good indicator.  The prospectus for this Big Timer Mutual Fund should list most, if not all of the companies the fund manager has selected.  You can now set up your Foliofn account to automatically purchase an equal share or based on the same percentage of each stock in the Big Timer Fund.  Now, as Big Timer makes 75% returns, so do you.  This does require you to check The Big Timer Fund from time to time and stay current with changes they may have made.  Otherwise, things could go south quickly if they have news you didn’t hear.

There are three other major benefits of this approach.  The first is that cash dividends are paid directly into your account.  If you own 200 shares of Company B and the dividend pay out is $2 per share, then $400 show up in your account.  This doesn’t happen with mutual funds.  Secondly, if there is a stock split by either company, your Foliofn account reflects an equivalent increase in the number of shares for that stock.  When investing in a mutual fund directly, you won’t enjoy the full potential benefit of dividends and stock splits.  The last major benefit is cost.  If you only invest $10,000 in a typical mutual fund, it will most likely cost you several hundred dollars for the first year and increase as the value of your account increases.  Foliofn.com only charges $19.99 a month or $199 if you pay for a year and that doesn’t increase with the value of your account.  Plus you are able to make over 100 trades a month at no additional cost.  Take a look and tell me what you think.