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The rise of personal portfolios comes after a boom in mutual funds during the 1990s. At the same time investors started using the Internet and began questioning the hefty fees that came with actively managed funds.

That's why so many investors have herded into index funds, which simply shadow stock lists such as the Standard & Poor's 500 index. Over the past five years, the number of index-tracking funds has grown from 3 to 300, according to Bill Mann, a senior analyst at the Motley Fool and chief trustee of the Fool 50 Index, an index that can be purchased as a personal fund via Foliofn.

O'Shaughnessy and Wallman believe they have found an appealing bridge between mutual funds, index funds, and stocks.

Michael S. Nadel, a Washington, D.C., attorney and investor, agrees. "It really makes sense with how I want to invest," says Nadel, who began investing at Foliofn last August. Having put a "substantial sum" of money into his account since then, Nadel says his Foliofn portfolio has lost less ground than the Nasdaq-100 Trust.

Nadel describes his personal portfolio strategy as "mechanical investing," a formula-based approach similar to one written about and used by O'Shaughnessy. "I trust the mechanics more than I trust myself," Nadel notes, alluding to the approach's reliance on various stock fundamentals and technical indicators to regularly rebalance the investments.

And personal portfolios make the rebalancing easy as the click of a button. Given that he executes, on average, 15 to 20 trades per month in his Foliofn accounts, Nadel believes he'll save hundreds of dollars in trade commissions every year, while still achieving diversity and tax efficiency.

Creating a personal portfolio at Foliofn is easy. The site walks potential investors through a six-step process that defines risk tolerance, time horizon, and goals. At the end, Foliofn recommends several portfolios, each featuring up to 50 stocks, pre-balanced by market capitalization. Investors can shuffle their portfolios in twice-a-day windows, all covered by the $295 annual fee.

Netfolio's approach is similar. Customers select from one of 50 quantitative strategies, each of which creates a basket of stocks. These strategies are tested over a 30-year period using data from Standard & Poor's CompuStat database. Investors who wish to devise their own portfolios can use the same historical data. The costs are low compared to most brokerage transaction fees. Purchasing 50 different stocks from, say, Ameritrade, would cost most users $400 for the initial investment plus $8 per transaction.

And the cost also compares favorably to most mutual funds: At the end of 2000, the average domestic stock fund incurred a management cost of 1.43 percent of assets, according to analysis firm Morningstar. Netfolio's $200-per-year fee has the effect of adding 1 percent to total returns-presuming, of course, that one can match wits with the professional manager of that fund.

Despite the allure of flat-fee trading, both Netfolio and Foliofn insist that day traders need not apply. Foliofn's twice-daily trading windows render market-timing strategies almost worthless, although market orders can be placed at any time for $14.95. And Netfolio intends to counsel day traders to move elsewhere.