SoFi’s Roth IRA Fund Options

SoFi Technologies Inc. (SOFI) is a financial technology (fintech) company founded in 2011. It operates a digital platform offering a range of financial products and services, including loans, savings and checking accounts, and credit cards. The company also offers brokerage services, including a robo-advisory service that provides automated, algorithm-based financial planning with little to no human oversight. The robo-advisory service manages client portfolios of stocks, bonds, and exchange-traded funds (ETFs). SoFi does not offer mutual funds. But investors can use the company’s wide selection of ETFs issued by other companies to build a Roth IRA or other types of portfolios. SoFi, through its subsidiary Sofi Wealth, has assets under management (AUM) of approximately $523 million, as of January 3, 2022.

SoFi provides discount brokerage services through SoFi Invest, which comprises three service-focused subsidiaries: Sofi Wealth LLC, automated investment and advisory; SoFi Securities LLC, active investment and brokerage; and SoFi Digital Assets LLC, cryptocurrency trading. SoFi Invest allows investors to actively trade stocks, ETFs and cryptocurrencies. They can also take a more passive approach and have SoFi manage a diversified portfolio for them with no management fees. SoFi also allows investors to save for retirement with various retirement account options.

Investors in the United States have access to several tax-advantaged savings plans offered by a wide range of other financial services companies, including 401(k), Individual Retirement Accounts (IRAs), and Roth IRAs. The main difference between a Roth IRA and a traditional IRA is that the former is funded with after-tax dollars. This means that contributions to Roth IRAs are not tax deductible, where they are with traditional IRAs. But unlike a traditional IRA where funds withdrawn are taxed, a Roth IRA allows investors to withdraw funds tax-free.

All data in the bulleted lists for each fund below is as of March 8, 2022, unless otherwise noted.

• Expense ratio: 0.03% (as of April 29, 2021)
• Assets under management: $267.3 billion
• Total return over 1 year: 6.6%
• Yield for the last 12 months (TTM): 1.33%
• Date of creation: May 24, 2001

VTI is an ETF that aims to track the performance of the CRSP US Total Market Index, an index comprised of thousands of stocks of all market capitalizations and representing approximately 100% of the US investable equity market. The fund offers broad and diversified exposure to the US stock market. It is directed by Gerard O’Reilly and Walter Nejman. O’Reilly has advised the fund since 2001 and Nejman since 2016. Of the ETF’s 4,136 holdings, 66.9% are large-cap stocks, 3.9% are mid- to large-cap stocks, 14, 9% are mid cap, 6.1% are between small and mid cap. cap, and 8.2% are small cap. The fund’s average market capitalization is $537.0 billion.

VTI is the cheapest broad equity fund with the most holdings offered on the SoFi platform. A single large equity fund is normally sufficient for most investors looking to build a long-term portfolio for retirement. A total equity fund, like VTI, is preferable to an S&P 500 index fund because it offers greater diversification by providing exposure to small and mid-cap stocks in addition to large caps. The iShares Core S&P Total US Stock Market ETF (ITOT) and the Schwab US Broad Market ETF (SCHB) are also inexpensive alternatives. But VTI has more holdings, which makes it more diverse than the other two.

A broad-based equity fund like VTI carries a certain degree of risk, but it also offers investors some pretty strong growth opportunities. For many investors, this ETF can serve as the foundation of a well-diversified investment portfolio. However, for those with a very low tolerance for risk or nearing retirement, a more income-oriented portfolio may be a better option.

• Expense ratio: 0.00%
• Assets under management: $256.6 million
• Total return over 1 year: -3.5%
• Rolling 12-month yield (TTM): 1.61%
• Creation date: April 22, 2020

BKAG is a passively managed ETF that aims to track the performance of the Bloomberg Barclays US Aggregate Total Return Index, a broad benchmark that measures the US dollar denominated investment grade fixed rate taxable bond market. The fund offers investors broad exposure to the broad US bond market. BKAG has a zero percent expense ratio and is the cheapest broad bond fund offered by SoFi. It is managed by Nancy G. Rogers and Gregory A. Lee, who both advised the fund for two years. Of the fund’s 2,082 holdings, 39.5% are treasury bills, 27.6% are fixed rate agency bonds and the remaining 33% are bonds or other debt securities issued by entities operating in the following market sectors: banking, consumer staples, technology, communications, energy, power, consumer cyclicals and capital goods.

Broad-based bond or fixed-income funds are generally less risky than equity funds. However, bond funds don’t offer the same growth potential, which usually means lower returns. They can be useful tools both for medium-risk investors and as part of a portfolio diversification strategy. Consistent with modern portfolio theory, risk-averse investors will find that investing in both a broad-based bond fund and a broad-based equity fund provides diversification. It is an approach that tends to maximize returns while minimizing risk.

Conventional wisdom suggests that the precise mix of stocks and bonds in a long-term portfolio should follow the 60/40 rule – 60% stocks and 40% bonds – and that the proportion of stocks to to bonds should decline as the investor ages. But the conventional wisdom has changed, and many leading financial advisers and investors, including Warren Buffett, now recommend that owning a higher percentage of stocks throughout an investor’s career can dramatically improve returns. potential while only marginally increasing the risks. Investors should always consider their own financial needs and risk appetite before making any investment decision.

The essential

A Roth IRA offers investors certain tax benefits. Roth IRAs are unique in that they are funded with after-tax dollars and are not taxed when the funds are withdrawn at a later date. In short, funds invested in a Roth IRA can grow tax-free. After opening a Roth IRA, the types of investments chosen will depend on the individual investor’s risk tolerance and the amount of time and energy they have to research various investments.

For investors with limited time and energy, one option is to opt for a few large diversified funds, allocating some of their money to a broad-based equity fund and some to a bond fund. broad-based. These large, diversified funds can also create a solid foundation for many investors who have the extra time and energy to evaluate other, sometimes riskier, investment options involving investments in individual companies or specific market niches, such as small cap stocks.