As the stock market climaxed and business boomed, it's no surprise that the "individualized investing" rage attracted many investors, including entrepreneurs. But in this economy, will do-it-yourself investors make their way back to a more traditional path?
Over the past few years, a couple of key models for customized investing have emerged: "community stock funds," where online members help pick stocks within a fund; and "folios," or stock baskets, where each investor can compile a customized fund of stocks or simply remove unwanted companies from a preselected group. The common factor: The investor gets more say in where the money goes.
"Folios bridge the worlds of owning stock and mutual funds," says Nancy Smith, vice president of education and Web content for Vienna, Virginia-based FolioFN Inc., an early leader in the folio industry.
But are these armchair fund managers still the best-equipped investors to ride out the storm? Especially if they're running a business to boot?
Arguably, external issues are slowing what seems to be a natural evolution in personal finance. Even savvy entrepreneurial investors, worn down by slumping stocks and stretched thin by business woes, are likely leery of any investment opportunities-never mind ones that roam from the beaten path. The souring stock market almost certainly contributed to the demise of individual investment hopefuls like StockJungle.com Inc., which shut down its community-driven mutual fund last August, and Netfolio, a customized fund company that discontinued its service for individuals last September.
But analysts believe letting consumers exert more control over their portfolios is an idea whose time has come. "If you spend a lot of time looking at your investments, not necessarily trading frequently, this is a much more efficient way of buying and holding," says Jaime Punishill, a senior analyst for Forrester Research Inc.
Although he says customizing and managing a folio account from scratch is "no small task," Punishill believes more savvy investors, as well as professional financial planners, will embrace folios, especially to define their investing needs socially as well as financially. For example, they might invest in a mainstream fund, but remove companies with poor environmental records.
Experts believe the concept of customized funds will eventually flourish-particularly as established investment firms like Quick & Reilly, which has already teamed with FolioFN, and Fidelity Investments launch individual investing products.
Says Sterling, "This is a great way for average investors to get securities at a low cost."
- FolioFN Inc.
(703) 245-4800, www.foliofn.com
- Forrester Research Inc.
(617) 497-7090, www.forrester.com