Buying Fractions of Stock With SoFi Active Investing
SoFi offers numerous financial solutions including actively managed investment accounts. Recently introduced is the option to buy “Stock Bits”. This new features allows investors to decide how much money they would like to invest in an individual stock. Investors can own fractions of stocks instead of buying entire shares of a stock. This feature is not offered with most traditional investing platforms and there are many benefits for investors. Let’s take a look at what this will mean for your SoFi portfolio.
Fractional Stock Ownership vs Traditional Stock Purchases
The best way to explain the difference between SoFi Stock Bits and traditional stock purchases is by example. Currently Amazon is trading at over $1,900 per share. If you wanted to invest in Amazon you would need to buy at least one share which would cost whatever the current trading stock of the price is. This present two problems. First, the stock price may be prohibitive for investment for many investors. Second, it will not allow you to allocate your portfolio as you desire.
Imagine you have $5,000 to invest and you would like to make a portfolio. After exhaustive research you decide you would like to invest 20 percent of your portfolio in Amazon, Google, Intel, Tesla, and Apple. This would not be possible with a traditional investment platform. One single share of Amazon would account for nearly 40% of your entire portfolio. With fractional stock purchases you can decide the dollar amount you would like to invest in each individual company. In this case, $1,000 could be invested in each company to balance your portfolio as you desired.
Using SoFi Stock Bits
To invest with SoFi and buy fractional stocks you will need to sign up for their investment platform. After you have set up and funded your account you can begin buying and selling stocks and ETFs immediately. Stock Bits are not available for all stocks. When you search for a stock you will see one or two options for purchasing. The first option is traditional share purchases. If Stock Bits are available for a stock, you will see an option to purchase the stock at a specified dollar amount. Only stocks that has the option to buy a specified dollar amount are available for fractional investments.
As you continue to invest you may find that your Stock Bit purchases have exceeded an entire share of the stock. If this is the case you will have the option to sell an entire share or sell a fractional share. This will provide additional flexibility as you manage your investments.
More From SoFi – Additional Financial Services Explained
Active Investment Fees and Services
By far the most attractive feature of investing with SoFi is that investors are not subject to trading fees. There is not fee to buy or sell a stock or ETF. Users can buy with as little as $1 if you are purchasing a stock using the Stock Bit option. SoFi opens up investing to far more people buy offering no fee trades and fractional investment options. Furthermore, your portfolio is not subject to any management fees making this a truly free investment platform.
Like other traditional investment platforms all of your trades for full stock shares operate in real time. This means that your buy and sell prices will reflect exactly what the current price is in the market. However, it is important to note that Stock Bit transaction are processed once per day in the afternoon. That means that your Stock Bit purchase will not process until that days processing time has arrived. This of course can word to your advantage or disadvantage depending on the daily stock performance. For long term investments, this is mostly a non-issue. However, for short term trading this is an extremely important feature to be aware of.
SoFi Active Trading vs SoFi Automated Investments
SoFi offers two different investment options for their customers. The Active Trading Account is what was described above. This allows your to manage your own purchases. The Automated Investment option allows customers to pick their investment strategies and SoFi does the rest. SoFi offers 5 different investment strategies and your account will be invested and rebalanced without you doing any work.
Choosing which strategy is best for you will depend on your comfort with designing a portfolio. If you know exactly what ETFs and stocks you would like to buy then the active trading account will provide you with far more flexibility. The Automated Account will be preferred by customers who may not be familiar with investing or would prefer to take a more passive approach.
Final Thoughts – SoFi Fractional Investments
The SoFi investment platform is going to be a great tool for just about any investor. Zero fee trading will save investors big time in trading costs compared to traditional investment platforms. With fractional investments through Stock Bits users will easily be able to balance their portfolio exactly as they see fit. While not all stocks and ETFs are available for fractional trading there are many very popular options available. Overall, this trading platform gets very high marks and is an especially great option for new investors.
Do you have a favorite investment platform? Let us know in the comments below!