What You Should Know About SoFi?

What Is SoFi? Social Finance, Inc., a finance company, operates an online platform that provides financial services. It offers student loan refinancing, private student loans, personal loans, auto loan refinance, home loans, mortgage loans, and investments, as well as insurance products for renters, homeowners, automobiles, and others. Social Finance, Inc. was formerly known as Credit-Linked Community Notes of Social Finance Inc. The company was incorporated in 2011 and is based in San Francisco, California with additional office locations in Healdsburg, California; and New York, New York. “SoFi's mission is to help people reach financial independence to realize their ambitions and financial independence doesn't just mean being rich - it means getting to a point where your money works for the life you want to live. Everything we do is geared toward helping our members get their money right. We're constantly innovating and building ways to give our members what they need to make that happen. We were founded in 2011 and have developed a comprehensive suite of products that offers the speed, selection, content, and convenience that only an integrated digital platform can provide.” (From company’s website) Why SoFi Is So Popular? The main reason is its SoFi Invest. Basically, SoFi Invest is an online investment platform, where anyone who has an open account with SoFi, can buy and sell stocks/ETFs. It doesn’t sound very interesting, right? However, SoFi Invest is very user-friendly and simple to use. It is a great start for beginners who are looking for a simple way to get started with investing. Besides that, it has no minimum amount to open an account. Compared to other investment platforms, for example, Wealthfront, which requires a minimum investment of $500, SoFi has quickly become one of the popular online investment platforms in the US. Moreover, SoFi also offers quick money transfers between different accounts. It has become one of the advantages in terms of time efficiency. Just to imagine the situation when you want to buy something but it takes days to transfer your money from one account to another. You don’t want that happening when you are investing in the stock market. Time is money! Lastly, the company has launched its cryptocurrency platform for expanding its business segment. As cryptocurrency has really become a thing now, many young people have been looking for places to invest in cryptocurrency. SoFi Invest Pros & Cons Pros: User-friendly and easy to use for beginners No minimum deposits to start investing No trading fees Access to all available Certified Financial Planners Available crypto trading Cons: No tax-loss harvesting (an investing technique where you can sell stock or mutual funds at a loss for tax avoidance) Limited trading order types (only market orders available) Limited track record Only available to US residents Comparison SoFi Robinhood Wealthfront Minimum Investment Requirement $0 $0 $500 Access to Financial Advisers Yes No No Fee None None 0.25% for automated investing Investment Choices Stocks, ETFs, Cryptocurrencies, Stocks, ETFs, options, Cryptocurrencies, ADRs ETFs How Does it Make Money? Basically, the company’s business model is simply easy to understand. It’s made of two parts: cash inflow and cash outflow. Step one: the company gets money from customers’ deposits. Customers deposit their money into their SoFi Money and SoFi Invest accounts in order to save or invest in the equity market. Step two: the company will lend the money (deposits from customers) to people who need money through loans and make money out of the interest rate spread. It sounds like a small bank, right? Actually, it is. You can view it as a small financial bank where it takes customer deposits and lend them out in order to consistently make excessive returns. So, as long as the cash inflow > cash outflow, the company will maintain its function and operation. Similarly, it also faces the same risks (interest risk, liquidity risk, etc.) that any big commercial bank faces. Does SoFi Make Money? As of Dec 31, 2020, the company has lost ~$56 million, and the trend is expected to continue. The company has only ~$663K loss from operations, and ~$55 million loss from change in fair value of warrant liabilities, which is the largest loss on the income statement. In short, a large proportion of net companies is highly correlated with stock performance. So, we don’t think the company has an attainable and high-quality source of income. This could be one of the reasons why its stock price has been dumped since its IPO. Conclusion: Bearish Due to COVID-19, online investing platforms have surged in terms of popularity and profitability. However, it seems like it doesn’t apply to SoFi. SoFi is a company that provides financial services including investing, loans (students and business) and other services to a broad of customers. You can trade stocks and ETFs for free with no minimum deposit to start investing. You can also buy cryptocurrency at an extremely low cost. However, it also has some drawbacks though. It is available only for US residents. Its trading method is quite limited as well as product portfolio. Besides that, its research tools are very basic. Most importantly, it is a company with a large net income loss and highly correlated with the stock market due to its special business model and products. Overall, I have a bearish outlook on SoFi due to its low quality of earnings with extreme volatility. However, it doesn’t mean you should sell or short SoFi immediately. Make sure to do your own DD before making any investment decisions. Hope you have a great investing experience. Peace out. Source: https://www.businessinsider.com/personal-finance/sofi-invest-review  https://investors.sofi.com/overview/default.aspx

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TOTHEMOON123

Jul 13, 2021

6.16%

Change % Since Posting

16.08

Price When Posted

0.99

Change Since Posting

SOFI

SoFi Technologies Inc

15.09

-0.41
-2.65%
Current Price

What You Should Know About SoFi?

bearish

What Is SoFi?

Social Finance, Inc., a finance company, operates an online platform that provides financial services. It offers student loan refinancing, private student loans, personal loans, auto loan refinance, home loans, mortgage loans, and investments, as well as insurance products for renters, homeowners, automobiles, and others. Social Finance, Inc. was formerly known as Credit-Linked Community Notes of Social Finance Inc. The company was incorporated in 2011 and is based in San Francisco, California with additional office locations in Healdsburg, California; and New York, New York.

“SoFi's mission is to help people reach financial independence to realize their ambitions and financial independence doesn't just mean being rich - it means getting to a point where your money works for the life you want to live. Everything we do is geared toward helping our members get their money right. We're constantly innovating and building ways to give our members what they need to make that happen. We were founded in 2011 and have developed a comprehensive suite of products that offers the speed, selection, content, and convenience that only an integrated digital platform can provide.” (From company’s website)

 

Why SoFi Is So Popular?

The main reason is its SoFi Invest. Basically, SoFi Invest is an online investment platform, where anyone who has an open account with SoFi, can buy and sell stocks/ETFs. It doesn’t sound very interesting, right? However, SoFi Invest is very user-friendly and simple to use. It is a great start for beginners who are looking for a simple way to get started with investing.

Besides that, it has no minimum amount to open an account. Compared to other investment platforms, for example, Wealthfront, which requires a minimum investment of $500, SoFi has quickly become one of the popular online investment platforms in the US.

Moreover, SoFi also offers quick money transfers between different accounts. It has become one of the advantages in terms of time efficiency. Just to imagine the situation when you want to buy something but it takes days to transfer your money from one account to another. You don’t want that happening when you are investing in the stock market. Time is money!

Lastly, the company has launched its cryptocurrency platform for expanding its business segment. As cryptocurrency has really become a thing now, many young people have been looking for places to invest in cryptocurrency.

 

SoFi Invest Pros & Cons

Pros:

  • User-friendly and easy to use for beginners
  • No minimum deposits to start investing
  • No trading fees
  • Access to all available Certified Financial Planners
  • Available crypto trading

Cons:

  • No tax-loss harvesting (an investing technique where you can sell stock or mutual funds at a loss for tax avoidance)
  • Limited trading order types (only market orders available)
  • Limited track record
  • Only available to US residents

 

Comparison

 

SoFi

Robinhood

Wealthfront

Minimum Investment Requirement

$0

$0

$500

Access to Financial Advisers

Yes

No

No

Fee

None

None

0.25% for automated investing

Investment Choices

Stocks, ETFs, Cryptocurrencies,

Stocks, ETFs, options, Cryptocurrencies, ADRs

ETFs

 

How Does it Make Money?

Basically, the company’s business model is simply easy to understand. It’s made of two parts: cash inflow and cash outflow.

Step one: the company gets money from customers’ deposits. Customers deposit their money into their SoFi Money and SoFi Invest accounts in order to save or invest in the equity market.

Step two: the company will lend the money (deposits from customers) to people who need money through loans and make money out of the interest rate spread.

It sounds like a small bank, right? Actually, it is. You can view it as a small financial bank where it takes customer deposits and lend them out in order to consistently make excessive returns. So, as long as the cash inflow > cash outflow, the company will maintain its function and operation. Similarly, it also faces the same risks (interest risk, liquidity risk, etc.) that any big commercial bank faces.

 

Does SoFi Make Money?

As of Dec 31, 2020, the company has lost ~$56 million, and the trend is expected to continue. The company has only ~$663K loss from operations, and ~$55 million loss from change in fair value of warrant liabilities, which is the largest loss on the income statement. In short, a large proportion of net companies is highly correlated with stock performance. So, we don’t think the company has an attainable and high-quality source of income. This could be one of the reasons why its stock price has been dumped since its IPO.

 

Conclusion: Bearish

Due to COVID-19, online investing platforms have surged in terms of popularity and profitability. However, it seems like it doesn’t apply to SoFi.

SoFi is a company that provides financial services including investing, loans (students and business) and other services to a broad of customers. You can trade stocks and ETFs for free with no minimum deposit to start investing. You can also buy cryptocurrency at an extremely low cost.

However, it also has some drawbacks though. It is available only for US residents. Its trading method is quite limited as well as product portfolio. Besides that, its research tools are very basic. Most importantly, it is a company with a large net income loss and highly correlated with the stock market due to its special business model and products.

Overall, I have a bearish outlook on SoFi due to its low quality of earnings with extreme volatility. However, it doesn’t mean you should sell or short SoFi immediately. Make sure to do your own DD before making any investment decisions. Hope you have a great investing experience. Peace out.

 

Source:

https://www.businessinsider.com/personal-finance/sofi-invest-review 

https://investors.sofi.com/overview/default.aspx

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