Shares of SoFi Technologies (SOFI 4.22%) more than doubled in value over the first half of 2023, so it's no surprise that many investors are interested in buying SoFi stock. The financial services company has been growing quickly and now has over $12 billion in deposits.
Since SoFi is a publicly traded company, any investor can add it to their portfolio via a brokerage account. In this guide, we'll go over how to invest in SoFi stock and whether it's a good idea.
How to buy
How to buy SoFi stock
You can buy SoFi stock by following a few simple steps.Step 1: Open a brokerage account
A brokerage account allows you to buy stocks and other types of investments, including mutual funds, bonds, and options. If you don't have one already, you'll need to open one. You can find many of the top options on The Ascent's list of the best stock brokers. You can also invest in SoFi through an individual retirement account (IRA) or Roth IRA to save on taxes.
Once you've found a stock broker, select the option to open an account. You'll be asked to provide personal, employment, and financial information. It's a fairly quick process that can be completed within 15 to 20 minutes.Step 2: Figure out your budget
Next, decide how much you want to invest and whether this will be a one-time lump-sum investment or an investment you make regularly. For example, if you have some money saved, such as $1,000 or $5,000, you may want to invest it all at once. Or you could go with dollar-cost averaging, where you invest a set amount of money on a schedule, such as $500 on the 1st of every month.
You'll also need to decide how much of that money you want to invest in SoFi stock. If you don't have an investment portfolio, don't put all your money into a single company. It's better to spread your funds around to build a diversified portfolio. A good rule of thumb is to hold at least 25 companies to reduce your risk.
Step 3: Do your research
A key part of investing in stocks is to always do your homework before making any investing decisions. You may have already done this and decided that you think SoFi is a good choice. But if you're only planning to buy it because you've heard it has done well or has tons of growth potential, dig deeper before you buy.
There's a lot that goes into researching a stock. You should look at the numbers, including the price-to-earnings (P/E) ratio and debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio. Also, evaluate the business as a whole, including its competitive advantage and management.
Step 4: Place an order
The final step is to place your order for SoFi stock. Search for it on your stock broker's trading platform, enter the amount you want to buy, and select the type of order you want to make.There are a couple types of stock orders: market orders and limit orders. A market order places your order immediately but doesn't guarantee a specific price -- it's typically near the ask price for buy orders. A limit order allows you to specify a price for your order, which will only be executed if that price is available.
Should I invest?
Should I invest in SoFi?
You should consider investing in SoFi if you're looking for growth. There's a lot to like about SoFi as an investment opportunity. It provides a wide range of financial products and services, including:- Bank accounts
- Credit cards
- Brokerage accounts
- Mortgages
- Student loans
- Insurance
Private Student Loans
It's also good at getting members to use multiple services by providing a quality customer experience, which includes educational resources and personalized recommendations. And it's a forward-thinking company that implements artificial intelligence (AI) to reduce operating costs.
Another reason to be bullish on SoFi is its growth over the years. The company's number of members has been soaring, with consistent year-over-year growth rates exceeding 40%. It has also regularly seen double-digit revenue growth.Keep in mind that growth stocks like SoFi tend to be more volatile. One particular concern some investors have with SoFi is that it could be overvalued. More conservative investors and those who already have aggressive portfolios may want to be careful about investing in SoFi.Profitability
Is SoFi profitable?
SoFi is not yet profitable. In 2022, it posted a net loss of $320.41 million. On a positive note, its profitability metrics are on the rise. While it could still take some time to be profitable, it's on the right track.
Total revenue for SoFi increased by 60% from 2021 to 2022, and its net loss amount decreased by 34% (from $483.94 million in 2021). In 2023, SoFi has continued to grow its revenue and add more members and deposits. Through the first half of the year, deposits were up 26% to $2.7 billion.Dividends
Does SoFi pay a dividend?
SoFi doesn't currently pay a dividend, and it hasn't paid one before, either. Right now, SoFi is generally considered a growth stock, and those usually don't pay dividends. It may do so in the future, as there are several bank stocks that make dividend payments to shareholders. But if you're interested in dividend stocks, you'll need to look elsewhere.
Commercial Banking
ETF options
ETFs with exposure to SoFi
An alternative to buying SoFi stock is to buy one of the many exchange-traded funds (ETFs) that invest in SoFi. An ETF pools investor money and puts it into a large number of securities. This type of fund typically has very low fees, making it a cost-effective way to invest.
Here are some of the top ETFs with exposure to SoFi:- The Vanguard Small-Cap ETF (VB 1.21%) allows you to invest in over 1,400 small-cap stocks in one purchase.
- The Vanguard Total Stock Market ETF (VTI 0.41%) is an easy way to invest in the entire U.S. stock market, including SoFi.
- The iShare Exponential Technologies ETF (NYSEMKT:XT) focuses on developing and emerging companies that create or use exponential technologies, and it currently has one of the higher SoFi allocations for an ETF.
A big advantage of going with an ETF is that it makes investing easier and far less time-consuming. If you invest in individual stocks, you'll need to do much more research to build out your portfolio.
However, you do give up control when investing in ETFs. SoFi will be a much smaller portion of your portfolio this way. Most ETFs with SoFi allocate less than 1% of the money to it. You could also pick an ETF you like so that you have a diversified portfolio while also investing in SoFi on the side.Stock splits
Will SoFi stock split?
SoFi could decide on a stock split in the future, but it hasn't announced plans to do so. If so, it will almost certainly be a reverse stock split, which consolidates shares and makes them more valuable. It's the opposite of a forward stock split, which divides shares and makes them less valuable.Shareholders of SoFi voted to give the board the discretionary authority for a reverse stock split in July 2022. The board hasn't announced an upcoming stock split yet, but it could do so based on that vote.
The motivation for a reverse stock split would be to make SoFi stock more attractive to investors. At the time of the vote, SoFi was trading at about $6 per share. Some people consider low-priced stocks risky, and brokerage firms can be reluctant to recommend them to clients.
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