Maybe you’ve seen advertisements or social media posts claiming to teach others how to earn money online with little to no effort. Maybe they’ve used the term “passive income.” Unfortunately, passive income—income that requires no active involvement after initial setup—really comes from one source: investments.
An investment is a purchased asset that potentially increases in value or generates income over time. A common example is buying a share in a company to either earn a payout (known as a dividend) or have it appreciate in value. If the share’s price increases, you can then sell the share for a premium and make a profit.
Another example is purchasing real estate. Buying an asset like real estate can generate income through rental costs to tenants. It can also increase in value over time due to an increase in housing demand, which makes the property more attractive to buyers.
At first glance, investing sounds great. I can make money just by giving my money to someone else? Sign me up!
But investing comes with its share of risks as not all assets are created equal. Investing requires time and research to find assets with reliable growth potential or income generation. There’s also the issue of choosing how to invest and which brokerage to use.
Thankfully, there are a number of online brokerages that offer investing services. We’ll be taking a look under the hood of one of the most well-known: SoFi Invest. If you’re not familiar with the investing platform, we’ll break down how it works, what types of investments it offers, the different account types available and its pros and cons.
What Is SoFi Invest?
SoFi is a financial tech (fintech) company that offers many financial products (e.g. student loans), including investments. Today, however, we’ll be focusing on the investing arm of SoFi in this article—SoFi Invest.
SoFi Invest is an online brokerage—a platform where you can buy and sell stocks, bonds, exchange-traded funds (ETFs) and other assets.
For those who are new to investing or don’t want the hassle of researching investing advice, SoFi offers robo investing. Customers can tell SoFi their risk preferences and the platform uses computer algorithms and market data to generate a bespoke portfolio. This portfolio is then managed and rebalanced based on your preferences, risk tolerance and financial goals.
The Pros and Cons f SoFi Invest
SoFi Invest has many investing options, but each investment—and each platform—has positives and negatives.
Let’s dig into the nitty gritty of this brokerage platform and see how it fares.
The Pros
SoFi Invest is a highly-rated online investing platform with many benefits, including:
- Complimentary financial advice: SoFi standard members get 30 minutes of free financial advice from a financial planner. SoFi Plus members get unlimited advice appointments.
- Dedicated customer care: SoFi has a detailed help center and a virtual assistant available 24/7. Human customer support is available from 5 a.m. to 7 p.m. Monday through Thursday and from 5 a.m. to 5 p.m. Friday through Sunday.
- Low fees and minimums: SoFi has no account minimums on investing accounts. Investors can trade stocks, bonds and ETFs with no commission fees and buy fractional shares with a minimum of $5.
- Multiple account options: SoFi offers customers many retirement account types for investing, such as Roth IRAs, traditional IRAs and SEP IRAs. Investors can also open a margin account to borrow against their current investments for cash at an interest rate of 11%.
- Various investment options: Both new and experienced traders can make use of SoFi’s numerous investing options, including stocks, ETFs, fractional shares, initial public offerings (IPOs), private credit investing, venture capital investing and commodities.
- Attractive bonuses: New investors that fund a SoFi Active Invest brokerage account with at least $50 can earn up to $1,000 in stock bonuses.
The Cons
Despite its benefits, SoFi Invest has a few drawbacks:
- No tax-loss harvesting: Stocks can be sold at any time, regardless of whether their value has increased or decreased. When a stock is sold for a gain, it is generally subject to tax. But, if you sold stocks at a loss, the opposite is true: you can get a tax break. Unfortunately, SoFi does not offer this service to members. This isn’t a major issue for new investors as tax-loss harvesting is extremely complex.
- Limited to U.S. assets: SoFi only offers investments that are U.S.-based, including ETFs, stocks and private equity.
- Required margin account minimum: Investors who want to borrow cash by surrendering their stocks to SoFi if they don’t pay back their loan must have at least $2,000 in their account to qualify.
- No ability to trade cryptocurrencies: SoFi no longer has an internal platform for investors to trade crypto like Bitcoin or Ethereum. However, they have partnered with BitGo and Blockchain.com to give investors access to these assets.
SoFi Account Types: Which Is Best For You?
SoFi is a good option for new and seasoned investors given its variety of trading options, both public and private. It offers many investment account types so investors with different goals can use their money as they see fit.
Some of the accounts SoFi Invest offers include:
- Individual brokerage accounts: Invest your cash in assets of your choice on your own. Individual accounts have no tax benefits.
- Joint brokerage accounts: Like individual accounts, joint brokerage accounts come with no tax benefits. However, more than one individual can access a joint account. Depending on the state you live in, these accounts may be called joint with right of survivorship (JWROS), community property or tenants by entirety accounts.
- Traditional retirement accounts: Standard IRA investment accounts allow you to save for retirement without paying tax immediately. In most cases, contributions to these accounts reduce your taxes owed. And any gains or income in these accounts are not taxed until money is removed.
- Roth retirement accounts: Roth IRAs are another type of account designed for retirement savings. Any contributions made are not tax-deductible but withdrawals are not taxed so long as they fall within IRS guidelines.
- Rollover retirement accounts: SoFi members who had a tax-qualified account (e.g. 401(k)) with a previous employer or institution can transfer their assets to an IRA. Typically these rollovers allow you to avoid tax penalties you’d incur if you simply withdrew the money and transferred it to an account. Currently, SoFi has a 1% matching offer for IRA rollovers, though terms and conditions apply.
- Simplified employee pension (SEP) IRAs: SEP accounts are individual retirement accounts that only your employer can contribute to. Contributions to these IRAs are capped at 25% of your annual pay.
Does choosing an investment account from these options give you decision paralysis?
If so, SoFi has certified financial planners who can help you open the right account for your goals. Whether it’s about an emergency fund or complex IRA rollover, SoFi members can ask a CFP for complimentary advice for 30 minutes or less.
SoFi App
If you prefer investing, saving and managing your money from the palm of your hand, the SoFi app is a great option. SoFi’s mobile app—available on Android and iOS—has most of the features from the browser-based platform, including:
- Stock and ETF trading (automated and self-managed)
- Fractional share trading
- Exclusive access to IPOs
- Funds transfers between accounts
- Account activity tracking and review
- Open and manage retirement accounts
The SoFi app has an Apple App Store rating of 4.8/5 and a Google Play Store rating of 4/5.
SoFi Invest Has a Wealth of Options
SoFi has something for every kind of investor, no matter their risk profile or investment knowledge. With numerous accounts to choose from, tons of types of investments, free advice and a wealth of resources, SoFi Invest is a platform suitable for investors of all stripes.
Photo by sdx15/Shutterstock.
