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We detail the model portfolios by SoFi this article. In the article, you can find the description of the SoFi model investment portfolios. You can also find the performance of the portfolios and you can find out how you can implement them yourself.
SoFi Investment Portfolios, Not Frankenstein But Close
Social Finance (commonly known as SoFi) is an American online personal finance company that provides student loan refinancing, mortgages, personal loans, investing and banking.
We will focus on the investing part of SoFi in this article.
SoFi had a rocketing career ever since it was founded in 2011. They are heavily into refinancing student loans.
SoFi is not roboadvisor per se. But they do have model portfolios. They make it easy for you to invest in their model portfolios.
For one thing. Their conservative retirement portfolios only hold bonds. This is a recipe for disaster. Unless you have a truckload of money, you will run out of money in this (in 2020) low-interest environment. It is terrible advice to hold all of your savings in bonds. A better and measured approach is to use the bucket approach described by Christine Benz of Morningstar.
The other thing that SoFi does a little differently is their use of safe assets. A safe asset is an asset class in your portfolio that stabilizes your portfolios from wild swings in value and hopefully keeps up with inflation. Examples include bonds and short-term bonds.
SoFi also uses short-term bonds for this, but they also allocate a small portion (5-10%) to the asset class short-term high-yield bonds, A.K.A short-term junk bonds. This is very strange as this asset class is more volatile than short-term bonds. It does give a higher yield, but they are there to stabilize, not provide a higher return. A better approach would be to allocate to corporate bonds, junk bonds, or just a total bond fund.
The short-term high yield asset class is a Frankenstein asset class. It provides the worst of the junk bonds and short-term bonds. The asset class offers high volatility and low returns.
We do not have a time series describing the short-term high yield asset class. We use a corporate bond time series instead.
SoFi also uses a high-yield muni bond. We use a corporate bond time series as a proxy. They have similar returns and risks without the tax benefits, but we can use it for benchmarking purposes.
The aggressive portfolio is the same for taxable and retirement account.
SoFi also allocates to high-yield munis. To benchmark this asset class, we use corporate bonds as a proxy. The two asset classes have similar returns and risks, but the corporate bond does not the tax benefit. But we can use it for benchmarking purposes.
|Name||Asset class count||Year to date||Return in 2019||10 year return||CAGR since 1989 (%)||Risk level||Expense ratio|
|SoFi Model Portfolios Taxable Conservative||3||0.96%||7.08||3.64%||5.42||1||0.06%|
|SoFi Model Portfolios Taxable Moderately Conservative||6||-2.58%||12.63||5.46%||6.68||1||0.05%|
|SoFi Model Portfolios Taxable Moderate||6||-6.07%||18.8||7.24%||7.8||2||0.05%|
|SoFi Model Portfolios Taxable Moderately Aggressive||5||-8.39%||22.52||8.38%||8.25||3||0.05%|
|SoFi Model Portfolios Taxable/Retirement Aggressive||3||-10.73%||25.94||9.17%||8.53||3||0.05%|
|SoFi Model Portfolios Retirement Conservative||4||3.47%||8.86||3.54%||6.26||1||0.06%|
|SoFi Model Portfolios Retirement Moderately Conservative||6||-1.40%||12.63||5.46%||6.68||1||0.07%|
|SoFi Model Portfolios Retirement Moderate||6||-5.42%||18.8||7.24%||7.8||2||0.06%|
|SoFi Model Portfolios Retirement Moderately Aggressive||5||-8.08%||22.52||8.38%||8.25||3||0.06%|
Building the portfolio(s)
Below you can see the asset allocations for the portfolio(s). You can also see if the portfolio(s) has a socially responsible investing (ESG) variant portfolio. You can read more about socially responsible investing (ESG) investment portfolios in this post.
To build the portfolio(s) yourself, go to our best in class ETF page to see which ETF you should choose for a particular asset class. There you can also see which socially responsible investing ESG ETFs you should select.
Asset Allocation for SoFi investment portfolios
|Name||Total US Market||International Developed||Emerging Markets||Total Bond Market||Short Term Bonds||Intermediate Corp Bonds||Intermediate Terms Munis||Emerging Market Bonds|
|SoFi Model Portfolios Taxable Conservative||25.00%||75.00%|
|SoFi Model Portfolios Taxable Moderately Conservative||14.00%||12.00%||4.00%||15.00%||55.00%|
|SoFi Model Portfolios Taxable Moderate||28.00%||24.00%||8.00%||10.00%||30.00%|
|SoFi Model Portfolios Taxable Moderately Aggressive||38.00%||32.00%||10.00%||20.00%|
|SoFi Model Portfolios Taxable/Retirement Aggressive||47.00%||40.00%||13.00%|
|SoFi Model Portfolios Retirement Conservative||60.00%||25.00%||10.00%||5.00%|
|SoFi Model Portfolios Retirement Moderately Conservative||14.00%||12.00%||4.00%||40.00%||15.00%||5.00%||10.00%|
|SoFi Model Portfolios Retirement Moderate||28.00%||24.00%||8.00%||20.00%||10.00%||5.00%||5.00%|
|SoFi Model Portfolios Retirement Moderately Aggressive||38.00%||32.00%||10.00%||15.00%||5.00%|
How we select the right ETFs
There are a lot of ETFs out there. Most of them can be discarded because:
- They are too expensive
- They hold too few assets and are therefore too illiquid
- They do not meet the criteria for representing the asset class they are supposed to mirror.
We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?
If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).
As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.
You can find the socially responsible investing ESG ETFs in the same article.
Resources for the SoFi investment portfolios
Check out SoFi’s YouTube channel.
Suggestions for your next steps
Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone
If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.
You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool
SoFi does a lot of things right. Investment portfolios are not one of them. They use an all-bond portfolio and odd choice of asset-classes.
What are your thoughts on SoFi?