SoFi Automated Investing

Josh Patoka
December 2, 2020

SoFi Automated Investing is the Robo-advisor product of SoFi Invest. Unlike most Robo-advisors, there are no annual management fees, and the minimum initial investment is only $1. Five different investment strategies are available to invest in stock and bond index ETFs (exchange-traded funds). All accounts include automatic rebalancing, but tax-loss harvesting is not an added feature.

Taxable and retirement investment accounts are available. Parents will need to open a 529 college savings plan or custodial investment accounts elsewhere, as SoFi does not offer those account types. SoFi Invest also offers self-guided investing in addition to the automated portfolios. Stock Bits lets you buy fractional shares of individual stock and ETFs.

How SoFi Automated Investing Manages Your Money

SoFi Automated Investing offers five portfolios with different investment strategies to match your risk tolerance and investment goals. These strategies invest in index funds following the Modern Portfolio Theory to hold different domestic and foreign assets. Other robo-advisors follow the same practice.

This diversified approach gives you total exposure to the world markets and can reduce your downside risk.

Each portfolio invests in a different combination of these stock and bond assets:

• US stocks
• Developed international stocks
• Emerging market stocks
• US Government bonds
• US Treasury inflation-protected bonds (TIPS)
• Municipal bonds
• Corporate bonds

SoFi may also hold alternative assets such as real estate index ETFs. Not every robo-advisor invests in these other asset classes.

Like other robo-advisors, SoFi Automated Investing offers free portfolio rebalancing. SoFi buys fractional shares of the portfolio ETFs to maintain your portfolio’s target asset allocation. Tax-loss harvesting isn’t available with SoFi, but you don’t pay an annual management fee, which helps you save money.

Investment Strategy Asset Allocation

What makes SoFi Automated Investing different than some of the other robo-advisors is their asset allocation. For example, an aggressive investor’s portfolio will hold 100% stocks, and a conservative portfolio will own 100% bonds. Only the “moderate” portfolios hold stocks and bonds.

Most robo-advisors hold at least 10% bonds for additional diversification.

Below is the stock-to-bond asset allocation for each level of risk, with aggressive taking on the highest risk and conservative taking on the lowest:

• Aggressive: 100% stocks
• Moderately aggressive: 80% stocks and 20% bonds
• Moderate: 60% stocks and 40% bonds
• Moderately conservative: 30% stocks and 70% bonds
• Conservative: 100% bonds

Investors with a long investment time horizon will want to choose the aggressive or moderately aggressive strategy. The bond-heavy conservative portfolios can be ideal for near-term savings goals while getting a higher yield than a savings account.

SoFi offers free access to certified financial planners. The advisor can help you choose the best strategy for your financial goals.

Advantages of SoFi Automated Investing

No management fees: SoFi doesn’t collect any annual management fees. Most robo-advisors charge a minimum 0.25% annual fee. The average index fund expense ratios between 0.03% and 0.08% are also reasonable.

Goals-based planning: SoFi asks for your savings goals to help you choose the best investment strategy. For example, saving for retirement may have a different investment strategy than buying a home.

Free financial advisor access: You can speak with a certified financial planner for free. The advisor can offer one-on-one personal financial advice. SoFi advisors are CFPs (certified financial planners) and hold the Series 65 license. They are required to operate in your best interest when recommending investment strategies.

Fractional investing: You can invest as little as $1, which is a lower minimum than many robo-advisors. Each trade buys fractional shares to keep your portfolio balanced.

SoFi Money: The SoFi Money cash management account earns a higher yield than a regular savings account. You get free ATM reimbursements worldwide and there are no account fees.

Disadvantages of SoFi Automated Investing

No tax-loss harvesting: Many robo-advisors offer tax-loss harvesting to minimize your tax bill. Not having this feature isn’t a significant disadvantage with a small balance because the potential tax savings are minimal. Also, retirement accounts are already tax-advantaged and don’t need additional harvesting.

SoFi member rate discount requires a higher balance: You can qualify for a member rate discount on select loan products that SoFi offers. However, you need a minimum $10,000 SoFi Invest account balance to be eligible for the discount on student loans and personal loans.  

No custodial accounts: Parents will need to use another brokerage to open an investing account for their children or to open a 529 college savings plan.

Is SoFi Automated Investing Safe?

All SoFi Investment accounts are SPIC-insured up to $500,000 if the broker fails. But this insurance doesn’t protect you from ordinary market losses. The SoFi Money cash management account has FDIC insurance up to $1.5 million.

Launched in 2017: SoFi Automated Investing began in 2017 and is a newer robo-advisor. Despite the short track record, SoFi uses an investment strategy similar to the older platforms.

Is SoFi Automated Investing Right For You?

SoFi Automated Investing can be a good fit if you want a fee-free robo-advisor and complimentary financial advisor access. The investment portfolios can give you similar results to other investing platforms that charge annual fees.