I am often asked how one might go about investing
in the GTI, or at least in the companies behind
it. Are there, for example, mutual funds that
specialize in these stocks?
There are no funds that I know of, though there are
stockbrokers and money managers who specialize
in them. Gilder Publishing will be glad to tell you
who they are and how to reach them.
The alternative is to build and manage your own
private fund. Through online trading, with its
convenience, low commissions and odd-lot
capability, even quite limited assets can create a
broad portfolio nowadays.
But weekly rebalancing? Forget about it. As I've
said on many occasions, it's not practical for an
individual investor. The transaction costs are
Then along comes an outfit called FOLIO.fn, and I
have to eat my words. They seem to have created
an investment product that makes rebalancing
quick and easy, while at the same time avoiding
high transaction costs.
(Since writing this, I've learned that another
company, called BUYandHOLD, is also a possible
source for this kind of portfolio creation and
maintenance. I haven't looked into it myself, but
from what others have told me, it's a definite
For $295 per year, FOLIOfn will let you create
three "folios" of up to 50 stocks each. (How
convenient: one for each of my indexes.) You can
then trade within each folio without limit and without
additional cost, as long as you stay within their two
daily trading "windows", and provided your stocks
are on their list of some 3,500 approved "window
stocks". There is a charge of $14.95 per trade for
companies not on the list (the GTI and DPI each
have two companies that didn't make the list).
When you establish a folio, you specify its initial
investment proportions, such as equal dollars in
each company, or an allocation in proportion to
market capitalization, or any other weights you
might want. At any time thereafter you can
rebalance to your original proportions with a
single command, or you can change your
proportions to something else.
So you could, in fact, pretty much duplicate all three
of my indexes, and all within your annual fee of $295
(except for the handful of non-window stocks).
I'm not saying that you should duplicate my indexes,
only that you could. Whatever you do, you have to
take into account your personal situation and
investment beliefs, as well as your individual needs
and goals. What's right for one investor may not be
right for another.
As far as rebalancing is concerned, there are a
number of issues to be considered, among them
1. Frequency. Is it good investment strategy to
rebalance regularly, or should you let your winners
ride (and your losers die in peace)?
2. Taxes. Unless your account is nontaxable,
rebalancing may result in capital gains taxes.
FOLIOfn is set up to help you deal with this
problem. For example, you can limit rebalancing
to new money only, so you're not actually selling
anything. Or you can sell only to the extent that
you're able to offset gains with losses. FOLIOfn
will do either of these automatically for you
according to your specification. Moreover, in
selling they will always choose the shares with
the highest basis, if that is your instruction.
3. Other transaction costs. Whenever you buy or
sell a stock at the market price, you're always on
the wrong side of the bid-asked spread. If you
rebalance frequently, that's an added cost that can
be significant. Again, FOLIOfn may be able to help
you with this. To the extent that your trade is
matched by another customer's, the two trades are
accomplished in house at a price between the bid
and asked prices.
Mitigation of the bid-asked spread would be a
trading advantage even if you never rebalanced.
At this point, as I look back at what I've written, I
fear it must sound to the reader as if I'm trying to
sell you on FOLIOfn. I assure you I am not, and if
you decide to do business with them, you're on
your own. My only interest is to make you aware
of a product that might be useful to you.
I have no financial interest in FOLIOfn whatsoever,
though I may one of these days open an account
with them myself. And from what I've seen so far,
I wouldn't mind getting in on their IPO some day.
I like the looks of their business plan.
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