SoFi Invest Review
- Commissions and Fees
- Ease of Use
- Investment Options
- Platforms and Software
SoFi Invest may be a name that rings your ears. SoFi Invest is an online broker that incorporates robo-advisory features and much more. So, does SoFi Invest sound right for you and your trading/investing? Read more in our n-depth review to find out if SoFi Invest has what you’ve been looking for.
About SoFi Invest
SoFi Invest is an online broker offering zero-commission trading along with robo-advisory features. Active trading and automated investing are the two types of trading they accommodate trying to appeal to both traders and investors with fractional shares purchases, no fees and a low $100 minimum account balance. This relative newcomer has come with all guns blazing in terms of ease-of-use, low-cost and convenience.
Sofi Invest was formerly known as Sofi Wealth. SoFi is short for “social finance” and started in the student, home and personal loan business by four Stanford Graduate Business School students in 2011. Co-founder Mike Cagney spearheaded the company as a student loan refinancing company raising over $500 million in debt and equity. The company moved on to home and personal loans funding over $12 billion in loans by 2016 in its alumni lending platform composed of over 175,000 members. Due to allegations of compliance improprieties, Cagney was replaced by former high-profile Goldman Sachs analyst and former COO of Twitter, Anthony Noto took over the CEO role in 2018 and closed a $500 million funding round in 2019 from Qatar Investment Authority.
How SoFi Invest Works
SoFi Invest performs two main purposes: active investing and automated investing. The active investing enables users to buy and sell shares of U.S. stocks commission-fee with margin. There is no short-selling allowed. Cryptocurrency trading is coming soon. They cater to starting investors and small accounts by enabling fractional share purchases of ETFs and select stocks, which they call StockBits. StockBits enables investors to specify how much money they want to invest in a stock, rather than how many shares to purchase. SoFi bundles the requests for the selected stocks (over 50 of the most liquid names) and delivers the respective fractional shares needed to meet the dollar amount request to the 1/1000th of a single share.
The automated investing or robo-advisor functions typically in line with other robo-advisors. Users answer a series of personal financial questions to determine risk profile. The algorithms crunch the data to recommend a personalized portfolio best aligned with the goals and preferences. Users can select the settings for auto-investing schedules and let the robo-broker handle the transactions including rebalancing.
Sofi is currently available for U.S. customers over 18-years of age. While there is no minimum balance requirement, they do recommend starting with $100 in the account. Users can commit to a $20-per month deposit to qualify for additional perks like invitation to exclusive SoFi events and access to career coaches.
SoFi Invest Pricing and Fees
SoFi has no fees or commissions. This applies to trades as well as their robo-advisor automated investing service. There are no inactivity fees or platform fees. Consults with human investment advisors are also free. Overall, SoFi’s pricing is pretty impressive, and highly competitive when compared to other similar services.
As with most exchange-traded-funds (ETFs), there are indirect fees to consider. SoFi’s automated investing selects from a pool of index ETFs with minimum expense ratios from 0.04%. So, it’s important to pay attention to the individual ETFs fine print to determine what the fees are.
SoFi Invest Platform
The SoFi Invest platform runs on both desktop and mobile for iOS and Android. Commission-free trades are executed in real-time. Users have access to stock quotes, news and basic charting. They are planning on integrating crypto currency trading soon. The SoFi platform also integrates other services including personal loans, mortgages, student-loan refinancing, insurance and budgeting. SoFi is aiming to be the one-stop shop for all things financial for Millennials and young investors. Career counseling and exclusive events are part of the SoFi experience.
SoFi has an investment community of users that can share ideas and collaborate to make better investment decisions. The core theme is Social Finance and users are fee to communicate with like-minded investors via community forum, Twitter or Facebook. SoFi publishes a blog catering to young investors addressing investments, budgeting and managing finances. These are more fundamental research-based and lack any technical analysis content.
In addition to creating portfolios, the robo-advisor will automatically re-balance portfolios once a month when asset allocations exceed or fall below-preselected levels. Risk-tolerance levels are derived from the onboarding process where users answer questions pertaining to financial goals and risks. SoFi lets users adjust their risk levels or configure allocation percentages at any time. Users can also schedule automatic deposits for investing. Set-it and forget-it is the theme here.
SoFi Invest Portfolios
SoFi creates portfolios composed from a selection of over 20 indexes that include U.S. and international stocks, high-yield bonds, real estate and treasury bonds. Portfolios are constructed using principles of Modern Portfolio Strategy, which emphasizes diversification. Allocations and asset classes are adjusted based on investor risk tolerance and time line. There are six-types of portfolios based on risk tolerance ranging from conservative, moderately conservations, moderate, moderately aggressive to aggressive. Conservative portfolios have a higher concentration of liquid low-risk instruments like treasury bonds and high-grade corporate bonds. More aggressive portfolio types come with more volatility along with greater potential returns in a rising market.
As with most robo-brokers and robo-advisors, the long-only portfolios tend to track the benchmark indexes depending on the risk classification. However, SoFi has boldly posted the hypothetical back-tested returns if their portfolio types versus the benchmark indexes, which is rare. The 10-year hypothetical back-tested return for SoFi Aggressive Portfolio would have outperformed the benchmark by 32%. Of course, hindsight is 20/20.
SoFi Invest is taking on Robinhood with their no-fee commission-free trading. While both provide commission-free trading, SoFi enables fractional share purchases with their StockBits which enables investors to buy 1/1000ths of a share of some of the most widely-known stocks. SoFi doesn’t charge any management fees, which makes it cheaper than the popular robo-advisors like Betterment and Wealthfront that charge 0.25%. Sofi Invest users can also qualify for interest rate discounts on loan products.
SoFi Invest Key Differentiators
SoFi Invest enables integration with the complete Sofi ecosystem including SoFi Money with 2.25% APY interest rates with savings, checking and budgeting functions. SoFi Invest users may also qualify for discounts with SoFi loans as well as access to exclusive invitation-only events, access to career planners and financial advisors. Sofi’s core theme is to enable consumers to save, borrow and invest through a single trusted brand platform.
SoFi Invest has SIPC coverage for brokerage accounts as well as FDIC insurance on their savings and checking accounts linked to SoFi Money. The social media aspect and community forums keeps the company on its toes and aware of the sensitive nature of public sentiment. The company goes out of its way to extend some pretty amazing deals.
Who is SoFi Invest Best Suited For?
SoFi caters to Millennials and young investors looking start their journey into the world of growing an investment portfolio. The no-fee aspect is especially appealing to cost-conscious investors as well as the Stock Bits fractional shares that enables investors to take tiny bites of large-cap companies. More experienced investors may find the limited ETF selection and lack of tax beneficial functions too sophomoric.
- No fees or commissions for trading and robo-advisory automated portfolio management
- Stock Bits offer fractional investing in some of the most popular and widely held listed companies
- Perks include discounts on loan products and access to exclusive social events
- Large growing community of like-minded investors
- Convenient gateway to the complete SoFi brand ecosystem to save, borrow and invest
- Adding more functions and features quickly with crypto currencies on the horizon
- SoFi has so many subsidiaries that could cause confusion for users
- No tax-loss harvesting feature with robo-advisor