(February 14) – “Almost a year after an Internet start-up began offering investors a way to create their own stock funds, two of the biggest companies in the $7 trillion mutual fund industry are gearing up to introduce do-it- yourself investment portfolios,” writes Patrick McGeehan in today’s New York Times.

“Fidelity Investments, the giant mutual fund manager, and the Charles Schwab Corporation, the biggest online brokerage firm, are experimenting with baskets of stocks they can sell to investors who want an alternative to owning mutual funds or individual stocks in traditional brokerage accounts.”

“The impending arrival of those two companies in this segment of the investment market signals that customized baskets of stocks are catching on despite opposition from the mutual fund industry.”

” ‘We’re starting to see some of the major institutions starting to talk about innovations,’ said Steven Wallman, a former federal securities regulator who founded Foliofn last year to sell and trade baskets of stocks he calls folios. A folio is a preselected basket of stocks that an investor can modify. ‘It’s remarkable what competition can do.’ “

“Other established brokerage firms, including E*Trade Group, and Internet start- ups, including Netfolio, have announced plans to offer baskets of stocks but have not followed through.”

“The Investment Company Institute, the fund industry’s lobbying organization, felt so threatened by the advent of folios that it asked the Securities and Exchange Commission last summer to subject them and any similar products to the same regulations that govern mutual funds. Fidelity executives supported the institute’s argument, but the commission has not yet taken any action in response.”

“Fidelity, which is owned by the FMR Corporation and is based in Boston, plans to begin offering a variety of baskets of stocks, some devised by the Lehman Brothers investment bank, that it regards as having appeal to active traders who want to move money in and out of different sectors of the stock market.”