SoFi Invest: The Bare Bones for Beginners

The name “SoFi” may bring to mind sun-kissed college grads figuratively swimming in piles of debt. That’s because it was originally billed as a smart way to refinance student loans. Founded by business students from Stanford in 2011, SoFi (Social Finance, Inc.) has since expanded to offer mortgages and mortgage refinancing. They have also waded into the massed ranks of automated investing platforms.

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What makes SoFi Invest worth looking into? We think it may be the best auto-investing option for absolute beginners. If you have no prior knowledge of trading, or a very rudimentary understanding of the market and just want to “test the waters”, SoFi is a great place to start. SoFi has no management fees, no account minimums, and free investment advice.

With a $1 minimum investment, there is no reason why everyone should not look into a service like this. Don’t let your money fester in a savings account with little to no return; start investing, get vertical, take control of your future – this is the unofficial motto of auto investing.

Features of SoFi’s Automated Investing

  • Automatic rebalancing (quarterly)
  • Comprehensive goal planning
  • Investment advice from certified professionals
  • 10 different predefined portfolios, each sporting unique investment features

This is not to say that SoFi’s automated investing is perfect. For one, it only deals in ETFs (exchange traded funds). This means that you miss out on the portfolio diversity stressed on platforms like M1 Finance. Another feature that it sorely lacks is tax-loss harvesting. But if you can do without these things, SoFi’s platform is very low maintenance. It is bare bones, but sleek and tidy, packing many of the essential features you must pay for with other services.

SoFi Active Investing

Don’t worry, SoFi has an option for a more hands-on approach to investing. Covering stocks, bonds, ETFs, and cryptocurrency, SoFi Active functions as a basic brokerage account.

It is difficult to recommend Active Investing for true beginners, but if you have some basic knowledge and want the joy and high-stakes potential of making actual choices, this may be the better option. What SoFi active investing allows is the purchase of individual stocks, ETFs, and that which is all the current rage, crypto-currencies.

Features of SoFi Active Investing

  • Commission free trading
  • It is an active platform, allowing you to pick and choose the exact allocations in your portfolio
  • There is no account minimum
  • Fractional shares trading, which allows you to buy bits of a single stock. This is really helpful when you are undecided about the more expensive individual shares
  • Access to certified financial planners. Unsure of a move? Get advice from those with an insider’s edge on the world market

The real downside of SoFi’s Active Investing is the fact you cannot trade in index or mutual funds, or particular assets like futures or forex. This makes Active Invest powerful yet narrow. Like its passive counterpart, SoFi has created a sleek system that lacks the diverse flair of some competitors.

The Fruits of Customer Support

An aspect that is often overlooked in reviews of this nature is customer support. We can safely say that SoFi excels in this area. Advisors are available nearly around-the-clock via live chat, phone, or email. While the financial advisors don’t provide actual stock picks, they are always willing to help their clients navigate and get the most out of their investing platform.

Too Good to be True?

Whenever something is advertised as completely free, we think “what’s the catch?”. The cynical amongst us would claim that nothing in this world is free. Even though SoFi is a robust service considering its price-tag, there are a few things you should know:

The Downsides

  • SoFi’s auto invest locks you into a single strategy. Unlike M1 Finance, which allows you to add its “expert pies” to an existing portfolio, SoFi is not so easily manipulated. You pick the portfolio and that’s all she wrote.
  • SoFi’s Active Invest allows you to make changes, but does not allow purchasing of mutual and index funds.
  • Since it is an entirely free service, SoFi must make its money somehow. What they do is sell its users’ order flows, i.e. your personal information and investing habits. This is similar to the way many social media sites operate. While this may not seem so overtly wrong, there are some deep existential concerns that come into play.

The Bottom Line

What we hope this article illustrated is SoFi’s appeal to the casual newcomer. It may not be the service for someone who is interested in active day-trading, or even for those who prize the stabile pedigree of mutual funds. But if you are looking for a way to start quickly, cheaply, and safely investing, we can recommend this service with very few reservations.

Best of all, SoFi is legit: though advertised as free, you don’t have to worry about any hidden costs or strange requests down the road.

Interesting related article: “What is an Investment?