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Folio Investing – Is it legit? Review 2021

Folio Investing

8.2

Fees & Costs

7.0/10

Minimum Investment

10.0/10

Ease of use

8.0/10

Account Opening

8.0/10

Beginners

8.0/10

Pros

  • Fractional shares
  • Great for both hands-off investing and self-directed investors.
  • Automated rebalancing

Cons

  • Flat fee pricing (which is good) but some of the fees are excessive
Disclosure: Please note that this article may contain affiliate links

Do you have an investment strategy or do you wish someone would tell you how and where to invest?

Folio Investing provides just what you need whether you know where you want to invest and in what allocations or you want someone to do it for you.

Check out my review to see if Folio Investing is worth it or not.

What is Folio Investing?

Folio Investing is a robo-advisor with a twist. You can choose the traditional premade folios, like most robo-advisors offer or you can create a custom folio.

You also have the option to choose a Ready-to-Go Folio and customize it. Folio emphasizes long-term investing with diversified assets in as many as 100 securities.

Self-directed Investors
Account Minimum
$0
Management Fee
$29 monthly for unlimited transactions
Portfolio
Customizable, up to 100 different securities. ETFs, mutual funds and stocks
Rebalancing
Tax Loss Harvesting
Fractional Shares
Automatic deposits
Smart Beta
SRI
401(k) Assistance
Human Advice
Account Types
Individual, Joint, Custodial, Trust, Business, Roth, Traditional, Rollover, Simple and SEP-IRA
Best for
Self-directed investors who want a hands on approach and say in their investment.
Summary
Folio Investing allows you to customize your own folios. You do however also have the option to invest in a variety of pre-made folios. There is also an option to exclude certain securities to make your portfolio 100% socially responsible.
Self-directed Investors
Account Minimum
$0
Management Fee
$29 monthly for unlimited transactions
Portfolio
Customizable, up to 100 different securities. ETFs, mutual funds and stocks
Rebalancing
Tax Loss Harvesting
Fractional Shares
Automatic deposits
Smart Beta
SRI
401(k) Assistance
Human Advice
Account Types
Individual, Joint, Custodial, Trust, Business, Roth, Traditional, Rollover, Simple and SEP-IRA
Best for
Self-directed investors who want a hands on approach and say in their investment.
Summary
Folio Investing allows you to customize your own folios. You do however also have the option to invest in a variety of pre-made folios. There is also an option to exclude certain securities to make your portfolio 100% socially responsible.

How does it work?

Account opening

Opening an account at Folio is simple. There is no minimum deposit requirement and each investor creates a ‘folio’ or portfolio. You provide your personal identifying information, link your bank account, and answer questions about your risk profile and goals. Folio then sets up ‘folios’ for you.

Folio’s ‘folios’ are baskets of securities or portfolios.

Each folio may contain from 1 to 100 securities and include fractional shares. You may have as many folios as you want/can afford. If you prefer Ready to Go Folios, you have more than 100 baskets to choose from. If you customize your folio, you also choose the weight of each asset – whether you equally weight all assets or customize each asset’s weight.

Deposit and withdrawal

Once you open an account, transferring money is simple. Open the Transfers page on your dashboard and select deposit. Follow the on-screen instructions, but you can deposit funds via electronic transfer, check, wire, direct deposit, or your bank’s Bill Pay service.

Withdrawals work the same way. Select Transfers from your dashboard and then withdrawals. You can withdraw funds via electronic transfer, check, or wire transfer. Only account owners with an account manager or owner titles may withdraw funds. Folio allows users with ‘Account Detail Viewer’ status to view your account, but they cannot make changes including withdrawals.

Interface

Folio’s platform helps you determine the type of investor you are and then gives you choices. Whether you create custom folios or use the Ready to Go Folios, they help you through the process. The interface is easy to use for any investor.

Its interface is a bit antiquated, so don’t expect anything out of the ordinary or very modern. It does its job and that’s it.

Accounts

Investors may open any type of investment account including individual and joint taxable accounts, custodial and trust accounts, retirement accounts including traditional and Roth IRAs, and Simple/SEP IRAs.

Costs

Folio Investing has a Basic and an Unlimited Plan:

Basic plan

$15 per quarter for each funded account that makes less than 3 trades per quarter.

The Basic Plan includes:

  • Unlimited taxable and retirement accounts
  • Unlimited folios, with each folio containing 1 to 100 assets
  • Access to the Ready to Go Portfolios
  • $4 for each window trade (per security)
  • No required account balance
  • $10 fee for market, stop, limit, or stop-limit orders

Unlimited plan

$29 a month or $290 per year.

The Unlimited Plan includes:

  • Unlimited taxable and retirement accounts
  • Unlimited folios, with each folio containing 1 to 100 assets
  • Access to Ready to Go Portfolios
  • Up to 2,000 trades with no commissions in two daily window trades
  • $0.50 for each additional security trade
  • No required account balance
  • $3 for market, stop, limit, or stop-limit orders

Folio also charges some ‘special fees’:

  • $100 full transfer out to another broker
  • $20 per check withdrawal
  • $12.50 per paper copy statement
  • $45 per broker-assisted trade (via telephone)
  • $25 per year IRA custodial fee
  • $15 per quarter for balances left over after account closed

Folio’s mutual funds are no-load mutual funds. But they may have fees that the mutual fund company deducts right from the fund assets.

Additional features

Cash account

Folio offers a Cash Sweep program which ‘sweeps’ your uninvested cash into an FDIC insured interest-bearing account. The interest rates aren’t anything to get excited about – they match the interest rate you’d receive in your local bank’s checking account, but it’s better than leaving the cash not earning any interest.

The Cash Sweep program has tiered interest rates, though. The more cash you ‘sweep’ the higher the interest rate. This shouldn’t be an incentive to have cash, but if it happens, you know it can early a little interest. The Cash Sweep program provides access to check-writing and automated cash transfers.

You also have the option to ‘invest’ in FDIC PLUS, Folio’s highest-tier cash program. You invest your cash and earn money-market like rates.

Human advisors

Folio does offer broker-assisted trades, but at $45 a trade, you’re better off learning how to manage the trades yourself.

Customer service

Folio offers customer service via phone, email, or online chat. Customer service reps are available weekdays 7 AM – 9 PM ET; weekends 8 AM – 4 PM ET.

Research

Folio uses QuoteMedia for its stock research. You can view quotes, charts, financial analyses, and historical data.

Window Trading

Folio offers window trading, which could be good or bad, depending on how the market goes. Window trading means they only trade at certain times of the day. Basic members have one window and unlimited members have two. This means when the trade executes, it may or may not trade at the price that triggered the sale.

Virtual trading account

You can open a free watch account to test the waters before you invest with Folio. You trade ‘fake money’ in real-time to see how you’d do. You can have up to 10 watch folios to try out your own portfolios or to mimic a professional investor’s portfolio without risking your money.

Folio Investing Pros and Cons

PROs
You can buy fractional shares - This decreases the amount of cash drag because you don’t have to buy a full share.
CONs
Even though it’s flat-rate pricing, it can get pretty expensive – ... and there are cheaper robo-advisors available.
Folio has more than 100 Ready to Go Folios ready for you to choose from – Including Target Date RTGs, Low Volatility RTGs, Bond RTGs, and Strategy RTGs among many others.
Window trading could delay a trade by several hours, which could ruin your trading strategy.
You can customize any RTG – ... or start your own folio from scratch.
You make most of the trading decisions yourself without the help of an advisor.
Tax optimization – Folio plays ‘tax football’ which is a strategy to determine which securities to sell to lower your tax liability.
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Flat-free pricing - You don’t have to worry about excessive commissions on certain trades.
-
Folio offers automated portfolio rebalancing.
-
You get a free 60-day trial if you sign up for the unlimited plan.
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PROs
You can buy fractional shares - This decreases the amount of cash drag because you don’t have to buy a full share.
Folio has more than 100 Ready to Go Folios ready for you to choose from – Including Target Date RTGs, Low Volatility RTGs, Bond RTGs, and Strategy RTGs among many others.
You can customize any RTG – ... or start your own folio from scratch.
Tax optimization – Folio plays ‘tax football’ which is a strategy to determine which securities to sell to lower your tax liability.
Flat-free pricing - You don’t have to worry about excessive commissions on certain trades.
Folio offers automated portfolio rebalancing.
You get a free 60-day trial if you sign up for the unlimited plan.
CONs
Even though it’s flat-rate pricing, it can get pretty expensive – ... and there are cheaper robo-advisors available.
Window trading could delay a trade by several hours, which could ruin your trading strategy.
You make most of the trading decisions yourself without the help of an advisor.
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FAQ

Does Folio Investing trade bonds?

Yes and no. Folio trades bonds in fixed-income ETFs, but they don’t trade individual bonds. If you want conservative investments, you can choose one of the Ready to Go Folios made for conservative investing but that has a decent amount of diversification.

Do you have to sign up for the Cash Sweep option?

No, Folio Investing automatically enrolls every investor in the Cash Sweep program. They’ll hold your funds in their FDIC insured account or into a partner FDIC insured bank. The accounts have extended FDIC insurance, covering deposits in the millions. If you want a higher interest rate or better returns, consider the FDIC Plus Sweep program.

Is there a required minimum balance for Folio Investing?

No, investors with any amount of money may invest at Folio. You don’t need a minimum or maximum for trading either. You invest with the amount you have, and can even buy/trade fractional shares if you want.

How do you create your own folio?

If you don’t like any of the Ready to Go Folios or you want to try your hand at investing, click ‘Add New Folio’ on your account page and follow the on-screen instructions. You can construct your entire portfolio or take an RTG Folio and customize it to your liking.

What can you trade?

Investors can trade stocks, ETFs, and mutual funds. You can buy in fractional shares or whole shares and include as many as 100 investments in one folio. If you want to trade crypto you’re probably better off with a robo advisor like RobinHood.

Did Folio buy Motif?

Yes. As of May 20, 2020, Motif closed down and sold its accounts to Folio. All Motif investors automatically were enrolled in Folio’s unlimited investing plan.

What is a Ready-to-Go Folio?

A Ready-to-Go Folio is a pre-built portfolio. They are great for beginning investors or those that want a passive investment. With as many as 100 securities in one folio, it’s a great way to diversify without the work. You can even customize an RTG if you want to remove/replace a few securities.

How is Folio investing different from mutual funds?

Mutual funds are investments in a variety of companies managed by an account advisor. You don’t own the underlying securities, but a piece of the securities with mutual funds. With Folio, you own the securities themselves and can buy/sell them as needed. With mutual funds, you’re at the mercy of the investment manager’s decisions.

How does Folio Investing make money?

Folio Investing makes money in many ways, starting with their monthly or quarterly fees. They also charge commission fees and have margin accounts, which they earn interest on when investors borrow to trade.

Alternatives

Folio Investing vs M1 Finance

m1financeFolio Investing and M1 are very similar in the fact that they both allow custom investments and encourage independent choices versus automated robo-advisors that choose investments for you.

M1 has lower margin rates and doesn’t offer mutual funds, whereas Folio does offer mutual funds, but doesn’t encourage them. M1’s dashboard is a bit more intuitive and modern, whereas Folio’s is a bit ‘old school.’

Folio Investing vs RobinHood

Robinhood has been around for a while now. It was the pioneer of the free-commission trades. Granted, they aren’t the only one that offers free commissions, but they have a lot of trading options including stocks, options, ETFs, and cryptocurrency. Robinhood is completely hands-off.

Once you answer the platform’s questions, Robinhood chooses a portfolio for you, manages it, and reallocates it as needed. Robinhood is great for millennials or anyone who prefers to trade on their mobile phone.

Current Promotions

First 60 days off for unlimited plan.

Folio Investing – Worth It or a Scam?

Folio Investing focuses on diversification. If you have a hard time diversifying or don’t know where to invest, it’s a great option. According to Folio Investing, investors lose as much as 50 percent of their potential lifetime earnings by not diversifying, making Folio a great option for those who’d rather not lose such potential.

Summary

Folio Investing offers the best of both worlds. They’ll invest for you, allowing you to just sit back and passively earn. They offer customization of a Ready-to-Go portfolio, allowing you to get some hand-holding while customizing your portfolio or completely starting your portfolio from scratch.

It’s great for beginning and experienced investors and is a great way to minimize taxes and maximize your investments. The fees are a bit on the higher end, however the flat fee model also allows for more transparency.

If you are still undecided, use the following tool to find out which robo best fits your investing needs:

Robo Chooser

Use the following Quiz and find out which robo advisor is best for you.

If you have any questions, please comment below.

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