Fidelity To Join The Folio Bandwagon

by Carla Johnson, Investors Offshore.com

15 August 2001

As online stock baskets or 'folios' gain in popularity, Fidelity Investments has announced that it will be rolling out its own offering soon, making it the first mutual fund company to do so. The mutual fund giant hopes to appeal to its large base of DIY customers, who may be tiring of the fund market and are looking to try their hand at something new.

Fans of the stock baskets say that they pose a considerable threat to traditional mutual fund investment because they offer investors the protective diversification of funds, while at the same time giving access to the flexibility and potential savings to be found through online investment. Others, however, disagree, and feel that although it may be easier to jump on the bandwagon as it begins to slow, Fidelity may be making a big mistake. Many experts fear that folio investment encourages a trading mentality by allowing investors to execute trades faster, without giving them sufficient thought.

At online broker Charles Schwab, they are inclined to agree, and recently announced that they have pulled the plug on a similar product test which took place in the US. 'It just didn't seem to resonate with people,' explained Glen Mathison, a Schwab spokesman. 'That doesn't mean we won't look at something similar at some point in the future. We're just not doing anything right now.'

However, Fidelity remains undaunted, and over the coming months hopes to offer investors a number of stock baskets picked by its own analysts. The company says that the minimum required investment to open a basket of five to fifty stocks will be $10,000 in either cash or margin. Once the customer's portfolio is established, individual positions, or the basket as a whole can be traded throughout the day in real time.

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