Method and apparatus for enabling individual or smaller investors or others to create and manage a portfolio of securities or other assets or liabilities on a cost effective basis

• US 6,601,044 B1
• Filed: 08/24/1998
• Issued: 07/29/2003
• Est. Priority Date: 03/11/1998
• Status: Expired due to Term

• Current Assignee: Folio Financial Incorporated (Goldman Sachs Group Incorporated)
• Original Assignee: FOLIOfn Incorporated (Goldman Sachs Group Incorporated)
• Inventors: Wallman, Steven M. H.
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): Bashore, Alain L
• Application Number:
  US09/139,020
• Time in Patent Office: 1,800 Days
• Field of Search: 705/36, 705/37, 705/35
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/10 Tax strategies

Abstract

A computer-based system is disclosed for creating a portfolio of assets and executing trades in the assets to modify the portfolio. An embodiment of the disclosed system includes a first processor interfaced with an investor'"'"'s PC to select a plurality of assets to be in the investor'"'"'s portfolio based on the investor'"'"'s indicated preferences, to manage the portfolio in accordance with market changes and changes in the investor'"'"'s indicated preferences, and to electronically place at least one asset trading order in accordance with the investor'"'"'s indicated preferences. An embodiment of the system also includes a communication interface coupled to the processor and coupled to a plurality of other investors by which the processor electronically places the at least one order. Further, an embodiment of the system includes a central processor coupled to the communication interface, receiving a plurality of trading orders from among the plurality of investors'"'"' PC'"'"'s, and electronically forwarding the trading orders for execution to a third party.

Claims

1. A program encoded on a computer readable medium for executing on a computer, enabling an individual or smaller investor to create, manage and trade a portfolio of market tradable assets or liabilities, directly owned by the investor in a market for each of the assets or liabilities and for interfacing with a system for managing a plurality of individual or smaller investors'"'"' portfolios via a first communication link over which the individual or smaller investor transmits to the system trading data regarding trades of at least one asset or liability directly owned by the investor and that the individual or smaller investor desires to make, said program comprising:

a) a graphical investor interface prompting the individual or smaller investor for investor identification information, investor investment information, including an amount to be invested and a payment method, and investor preference data;

b) an asset allocation modeling process creating a percentage allocation of assets for the individual or smaller investor based on the investor preference data, wherein the graphical investor interface displays via the computer display a plurality of assets or liabilities among which the individual or smaller investor can select to create an individual or smaller investor portfolio containing assets or liabilities directly owned by the investor and commensurate with the percentage allocation of assets;

c) a risk and differential return calculation process continuously calculating a risk and a differential return of the entire individual or smaller investor portfolio relative to a standard industry measurement in response to changes in the portfolio made by the individual or smaller investor, and providing the relative risk and differential return to the graphical investor interface, which displays the relative risk and differential return to the individual or smaller investor, said risk and differential return process allocating the investment amount across the entire individual or smaller investor portfolio to identify trades of the assets or liabilities directly owned by the investor and contained in the portfolio that are required to achieve the desired risk and differential return, wherein said trades include single shares, odd lots and/or fractional shares of the assets or liabilities;

d) a portfolio editor process enabling the individual or smaller investor to modify the investor portfolio;

e) a value at risk and sensitivity calculation process calculating a value at risk and a sensitivity return of the entire individual or smaller investor portfolio, and providing such value and analysis to the graphical investor interface, which displays the value and analysis to the individual or smaller investor; and

f) a communication process communicating said investor identification information along with any trades of market tradable assets or liabilities to be executed in a market for each of the assets or liabilities to create or modify an individual or smaller investor'"'"'s portfolio to ensure an individual or smaller investor'"'"'s actual portfolio matches an individual or smaller investor'"'"'s desired portfolio to the system, and matching the parameters of any limitations imposed on the portfolio, as said trading data via the first communication link, said trading data including an order to trade the portfolio of assets or liabilities, said communication process communicating trades including single shares, odd lots and/or fractional shares of said assets or liabilities to the system for managing a plurality of individual or smaller investor'"'"'s portfolios for aggregation of said single shares, odd lots and/or fractional shares with other investors'"'"' trades.

2. The program according to claim 1, further comprising an automatic asset allocation adjustment process utilizing additional preference information provided by the individual or smaller investor regarding risk/return to re-adjust the asset allocation and to output a different asset allocation based on the additional preference information.

3. The program according to claim 1, wherein the graphical investor interface further comprises a routine that displays the relative risk and differential return as a color code.

4. The program according to claim 3, wherein the graphical investor interface further comprises a routine that changes the asset allocation in response to investor changes to the color code display.

5. The program according to claim 1, wherein the graphical investor interface further comprises a routine that displays the relative risk and differential return as a numerical indicator.

6. The program according to claim 5, further comprising an automatic asset allocation adjustment process changing the asset allocation in response to investor changes to the numerical indicator.

7. The program according to claim 1, wherein the graphical investor interface further comprises a routine that displays the relative risk and differential return as one selected from the group of:

an arrow on a dial, an arrow on a horizontal scale, and an arrow on a vertical scale.

8. The program according to claim 7, further comprising an automatic asset allocation adjustment process changing the asset allocation in response to investor changes to the location of the arrow on one selected from the group of:

the dial, the horizontal scale, and the vertical scale.

9. The program according to claim 1, wherein the graphical investor interface further comprises a routine that displays the relative risk and differential return as an arrow on a range of numerical values.

10. The program according to claim 1, further comprising an automatic asset allocation adjustment process changing the asset allocation in response to investor changes to the arrow on the range of numerical values.

11. The program according to claim 1, further comprising a configuration control process that provides a version number of the program to the system in response to a request from the system, wherein the system automatically downloads an updated version of the investor program upon detection of an out of date version.

12. The program according to claim 1, wherein the portfolio editor process further comprises a routine that accesses a database located in the system storing a plurality of assets or liabilities, from which the individual or smaller investor can select to create and modify the portfolio of the individual or smaller investor.

13. The program according to claim 1, wherein the portfolio editor process further comprises a default portfolio process providing a default portfolio to the individual or smaller investor based on a selection of a type of portfolio by the individual or smaller investor.

14. The program according to claim 13, wherein the type of portfolio includes at least one selected from the group consisting of:

Dow Jones 30 index, S&

P 500 index and Russell 2000.

15. The program according to claim 13, wherein the default portfolio process creates a portfolio that reflects similar risk/return characteristics to one selected from the group consisting of:

the Dow Jones 30 index, the S&

P 500 index and the Russell 2000 index.

16. The program according to claim 1, wherein the portfolio editor process provides a list of assets or liabilities chosen by an investor specifiable group.

17. The program, according to claim 16, wherein the investor specifiable group includes at least one selected from the group consisting of:

lawyers, stockbrokers, engineers, accountants, farmers, writers, managers and union leaders.

18. The program according to claim 1, further comprising a natural language interface process receiving input from the individual or smaller investor.

19. The program according to claim 1, further comprising an affinity group creation process creating an affinity group comprising a plurality of individuals having similar characteristics, the characteristics being selectable by the investor, said affinity group creation process determining what assets or liabilities have been purchased by the affinity group, and executing a purchase of the assets or liabilities that have been purchased by the affinity group.

81. The program according to claim 13, wherein the type of portfolio includes a stock index or a subset of a stock index.

82. The program according to claim 13, wherein the default portfolio process creates a portfolio that reflects similar risk/return characteristics to a stock index or a subset of a stock index.

83. The program, according to claim 16, wherein the investor specifiable group includes investor selected and approved members.

20. A method using aggregation for creating and managing a portfolio of market tradable assets or liabilities, comprising the steps of:

obtaining a plurality of investor preferences for characteristics of a plurality of distinct assets or liabilities for the portfolio of an investor;

employing the plurality of investor preferences to select a plurality of distinct market tradable assets or liabilities to be owned directly by the investor and to be transacted in a market for each of the assets or liabilities in a plurality of transactions for the investor;

aggregating the plurality of transactions of the investor with a plurality of transactions of a plurality of other investors over an applicable characteristic of the plurality of assets or liabilities, wherein said aggregating includes aggregating single shares, odd lots and/or fractional shares using a computer; and

placing one or more trades based on said aggregating,

wherein the selected plurality of distinct market tradable assets or liabilities are owned directly by the investor in the investor'"'"'s portfolio as a result of said one or more trades.

21. The method according to claim 20, wherein the step of aggregating the plurality of transactions comprises the step of aggregating the plurality of transactions over a time period.

22. The method according to claim 21, wherein the time period includes every three hours.

23. The method according to claim 20, wherein aggregating the plurality of transactions comprises aggregating once per day at a time certain.

24. The method according to claim 20, wherein aggregating the plurality of transactions comprises aggregating a plurality of times per day at a plurality of predetermined times.

25. The method according to claim 20, wherein aggregating the plurality of transactions comprises aggregating over an amount, in terms of dollars or number, of transactions.

26. The method according to claim 20, further comprising the step of executing the plurality of transactions as aggregated.

27. The method according to claim 20, further comprising the step of netting buy orders against sell orders within the plurality of transactions of the investor and the plurality of other investors to obtain either a single buy order or a single sell order for at least one of the assets or liabilities after aggregating the plurality of transactions, and executing either the single buy order or the single sell order.

28. The method according to claim 20, further comprising the steps of:

creating an affinity group comprising individuals having similar characteristics, the characteristics being selectable by the investor;

determining what assets or liabilities have been transacted by the affinity group; and

executing similar transactions for the investor in the assets or liabilities that have been transacted by the affinity group.

29. The method according to claim 28, wherein the step of determining what assets or liabilities have been transacted further comprises the steps of:

soliciting demographic information from a plurality of investors comprising characteristics of the plurality of investors;

soliciting information relating to what assets or liabilities have been transacted by each of the plurality of investors;

storing the demographic information in a searchable database of demographic information;

storing the transacted information in the searchable database; and

associating the stored transacted information with the stored demographic information.

30. The method according to claim 29, further comprising the step of:

creating a historical performance output for the investor concerning the performance of the assets or liabilities of the affinity group.

31. The method according to claim 20, further comprising the step of displaying on a graphical investor interface relative risk and differential return as one selected from the group consisting of:

a color code, a numerical indicator, an arrow on a dial, an arrow on a horizontal scale, and an arrow on a vertical scale.

32. The method according to claim 20, further comprising the step of displaying on a graphical investor interface relative risk and differential return as an arrow on a range of numerical values.

33. The method according to claim 31, further comprising the step of changing the portfolio characteristics in response to the investor changing one selected from the group of:

the color code, the numerical indicator, the location of the arrow on the dial, the location of the arrow on the horizontal scale, and the location of the arrow on vertical scale.

34. The method according to claim 30, further comprising the step of changing the portfolio characteristics in response to the investor changing the location of the arrow on the range of numerical values.

35. The method according to claim 20, further comprising:

a) receiving data from each investor of the plurality of other investors regarding an amount of money to be invested in a portfolio for each respective investor for a predetermined period, and accessing an electronic payment system upon receiving instructions from said each investor to purchase said each respective portfolio of assets or liabilities to obtain payment for the required purchases;

b) enabling said each investor to create and manage said each respective portfolio of assets or liabilities directly owned by the respective investor by displaying a list of assets or liabilities from which said each investor can select to be in the portfolio;

c) receiving commands to trade said each respective portfolio of assets or liabilities directly owned by the respective investor, and sending trading orders to an electronic trading system for execution in accordance with the commands; and

d) storing said each investor'"'"'s portfolio.

36. The method according to claim 35, wherein aggregating the plurality of transactions comprises aggregating all investors'"'"' trades and sending the aggregated trades as a single trade in each asset or liability to a trading system.

37. The method according to claim 36, further comprising netting buy orders against sell orders before sending the aggregated trades to the trading system.

38. The method according to claim 20, further comprising presenting to the investor at least one input screen comprising structured questions in non-technical financial terms for interaction with the investor.

39. The method according to claim 20, wherein the plurality of transactions include an order to trade at least one of the assets or liabilities in a specified dollar amount.

40. The method according to claim 20, further comprising allocating a total dollar amount being invested by the investor among a plurality of assets or liabilities meeting a criteria entered by the investor by allocating to each of the plurality of assets or liabilities one of equal dollar amounts and capitalization-weighted dollar amounts.

41. The method according to claim 20, wherein the plurality of transactions include an order to trade at least one of the assets or liabilities according to a periodic monetary contribution to the investor portfolio.

42. The method according to claim 41, wherein the periodic monetary contribution includes one or more of the following:

a weekly contribution, a monthly contribution and an annual contribution.

43. The method according to claim 41, further comprising calculating a number of assets or liabilities to be purchased by dividing the periodic monetary contribution by a current purchase price of a whole share of at least one of the assets or liabilities.

44. The method according to claim 20, wherein the plurality of transactions include an order to trade in a dollar amount of assets or liabilities and a share amount of assets or liabilities.

45. The method according to claim 20, wherein aggregating single shares, odd lots and/or fractional shares comprises generating a single buy order and/or a single sell order for at least one of the assets or liabilities.

46. The method according to claim 20, wherein said investor preferences include input to an asset allocation model and further comprising creating a resulting percentage allocation of investment classes for the investor based on said asset allocation model input.

47. The method according to claim 20, further comprising transmitting a request for an electronic payment for the investor to a third party payment system, and receiving, in response to said request, electronic payment data for the investor electronically from the third party payment system.

48. The method according to claim 47, further comprising maintaining a payment account for the investor.

49. The method according to claim 48, further comprising permitting trading of the assets or liabilities for the investor only if the investor'"'"'s payment account contains at least a predetermined monetary amount.

50. The method according to claim 45, further comprising transmitting the single buy order and/or the single sell order to an electronic trading system for execution.

51. The method according to claim 20, further comprising prompting the investor for investor identification information and investor preferences, transmitting said investor identification and investor preferences to a processor, and enabling the investor to interact with the processor to select a plurality of assets or liabilities to create an investor portfolio commensurate with a percentage allocation of investment assets, and to have parameters and limitations established as to portfolio characteristics that will be permitted for the investor.

52. The method according to claim 20, further comprising creating or modifying the investor'"'"'s portfolio to ensure the investor'"'"'s actual portfolio matches the investor'"'"'s desired portfolio in accordance with the investor'"'"'s preferences.

53. The method according to claim 20, further comprising receiving an order to trade by at least the investor or one of the plurality of other investors a fractional share of at least one of the assets or liabilities.

54. The method according to claim 20, further comprising receiving an order to trade by at least the investor or one of the plurality of other investors an odd lot of shares for at least one of the assets or liabilities.

55. The method according to claim 20, further comprising receiving an order to trade by at least the investor or one of the plurality of other investors a small number of shares for at least one of the assets or liabilities.

56. The method according to claim 20, further comprising maintaining a tax basis and date of acquisition for all of the assets or liabilities traded by the investor.

57. The method according to claim 20, further comprising providing information to the investor regarding voting rights of the assets or liabilities held by the investor.

58. The method according to claim 45, further comprising receiving actual trading pricing information regarding the single buy order and/or the single sell order for at least one of the assets or liabilities.

59. The method according to claim 58, further comprising transmitting to the investor actual trading pricing information regarding each asset or liability traded by the investor.

60. The method according to claim 58, further comprising modifying a display of risk and differential return of the investor portfolio in accordance with the actual trading pricing information for at least one of the assets or liabilities traded by the investor.

61. The method according to claim 58, further comprising recommending modifications to the investor portfolio to the investor via a graphical user interface to make the investor portfolio match a percentage allocation previously determined if the investor portfolio no longer matches the percentage allocation as a result of the actual trading pricing information received.

62. The method according to claim 20, further comprising displaying a graphical user interface on a predetermined world wide web site via which the investor can provide investor identification information.

63. The method according to claims 20, further comprising creating an affinity group comprising individuals having similar characteristics, the similar characteristics being selectable by the investor, determining what assets or liabilities have been traded by the affinity group, and executing a trade of those assets or liabilities that have been traded by the affinity group on behalf of the investor.

64. The method according to claim 63, further comprising soliciting demographic information from a plurality of other investors comprising characteristics of the plurality of other investors, said soliciting including:

(i) soliciting information relating to what assets or liabilities have been traded by each of the plurality of other investors, (ii) storing the demographic information in a searchable database of demographic information, (iii) storing the traded assets or liabilities information in the searchable database; and

(iv) associating the stored assets or liabilities information with the stored demographic information.

65. The method according to claim 20, wherein the employing comprises providing a default portfolio to the investor based on a selection of a type of portfolio by the investor.

66. The method according to claim 65, wherein the type of portfolio includes at least one selected from the group consisting of:

Dow Jones 30 index, S&

P 500 index and Russell 2000.

67. The method according to claim 20, wherein the employing comprises creating a portfolio that reflects similar risk/return characteristics to one selected from the group consisting of:

the Dow Jones 30 index, the S&

P 500 index and the Russell 2000 index.

68. The method according to claim 20, further comprising providing to the investor a list of assets or liabilities chosen by an investor specifiable group.

69. The method according to claim 68, wherein the investor specifiable group includes at least one selected from the group consisting of:

lawyers, stockbrokers, engineers, accountants, farmers, writers, managers and union leaders.

70. The method according to claim 20, further comprising prompting the investor for investor identification information, investor investment information, including an amount to be invested and a payment method, and investor preferences.

71. The method according to claim 20, further comprising creating a percentage allocation of assets for the investor based on the investor preferences and displaying a plurality of assets or liabilities among which the investor can select to create the investor portfolio containing assets or liabilities commensurate with the percentage allocation of assets.

72. The method according to claim 20, further comprising continuously calculating a risk and a differential return of the entire investor portfolio relative to a standard industry measurement in response to changes in the investor portfolio made by the investor.

73. The method according to claim 72, further comprising displaying the relative risk and differential return to the investor, allocating an investment amount across the entire investor portfolio to identify trades of the assets or liabilities to be owned or currently owned by the investor and included in the investor portfolio that are required to achieve the desired risk and differential return.

74. The method according to claim 20, wherein the employing comprises providing a list of market tradable assets or liabilities to the investor and enabling the investor to select one or more assets or liabilities from the list to create the investor portfolio.

75. The method according to claim 20, wherein the employing comprises providing one or more pre-packaged groups of assets or liabilities to the investor and enabling the investor to select one or more of the pre-packaged groups to create the investor portfolio.

76. The method according to claim 20, wherein the obtaining comprises receiving investor preferences for portfolio characteristics of an investor, and the employing comprises using the portfolio characteristics to create the investor portfolio.

77. The method according to claim 20, wherein the employing comprises screening based on the investor preferences a plurality of assets or liabilities available for selection by the investor, providing to the investor a list assets or liabilities that satisfy the screening and enabling the investor to select one or more of the assets or liabilities from the list to create the investor portfolio.

78. The method according to claim 77, wherein the screening comprises including or excluding assets or liabilities according to at least one of:

a type of an asset or liability, a price of an asset or liability, a risk of an asset or liability, a geographic sector of an asset or liability, a product sector of an asset or liability, non-economic factors, social considerations, moral considerations, and political considerations.

79. The method according to claim 20, wherein the obtaining comprises receiving the plurality of investor preferences from at least one of:

a money-manager and a financial planner.

80. The method according to claim 20, wherein the obtaining comprises receiving the plurality of investor preferences from an agent acting on behalf of the investor.

84. The method according to claim 65, wherein the type of portfolio includes a stock index or a subset of a stock index.

85. The method according to claim 20, wherein the employing comprises creating a portfolio that reflects similar risk/return characteristics to a stock index or a subset of a stock index.

86. The method according to claim 68, wherein the investor specifiable group includes investor selected and approved members.