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Chapter 23. Folios

As mentioned in Chapter 20, investors can now construct for themselves a personalized basket of stocks in the form of what are called folios, which refers to a set of stocks taken together as a unit. Folios, like ETFs, represent a direct challenge to mutual funds. To date, this challenge is small because this alternative has only recently gotten underway. However, it appears to be catching on with the investing public, and could grow rapidly.

Let's define the folio approach to investing. An investor opens an online account and purchases one or more folios (groups) of stocks that, to a reasonable extent, becomes a substitute for owning a mutual fund. Investors can choose a preselected portfolio constructed by the provider of the service—the so-called ready-to-go option. These preselected portfolios typically have a single focus. Investors can also build a personalized portfolio using various stock screens, or by simply selecting stocks one at a time.


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