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Investing 101 Center

Welcome to SoFi’s Investing 101 Center

We believe that investing is for everyone—which is why we’ve created a hub with info for beginners and experts alike. Start exploring to get investment education, advice, resources, and more!

Investment Education For Beginners

New to investing? Let’s start with the basics. To get a comprehensive overview on investing, check out the SoFi Guide to Investing Intelligently. This will give you a great base of knowledge and contains a lot of information to help you get started.

Market News

Stay up to date with the latest information about what is happening in the markets.

Become an investor—for free.

Goal Setting

Before you start investing, it is important to understand your goals. Selecting an investment strategy depends on your goal amount, the time horizon, and your risk tolerance.

One common goal many people have is retirement planning. Goals can be broken down into short term, medium term, and long term. Here, we’ll break down these different types of goals and give you tips on how to set yours.

Short Term (Less than 3 years)

Example goals: Emergency fund, travel, buying a car

Medium Term (5-10 years)

Example goals: Buying a home, starting a family

Medium-Long Term (10-20 years)

Example goals: Child’s college savings, buying a second home

Long Term (20+ years)

Example goals: Retirement, financial independence

Setting your goals and determining if they are short term or long term can help you decide which type of portfolio to build.

For example, if you’re young (18-32 years old) and one of your goals is retirement, you may want to consider an aggressive portfolio—since your retirement date is 20+ years out, your portfolio can weather the market ups and downs.

As you get closer to retirement, it may make sense to move to a more conservative portfolio—the closer your goal is, the less risk you’ll likely want to take.

Commonly Used Investing Terminology

Here are some important investing terms to know. Below each definition, you’ll find an article that dives deeper into the term for more information.

Diversification

Diversification is spreading your investment over many different asset classes, business sectors, industries, companies, and countries. Investing has many risks, different assets carry specific risks to their asset class. Diversifying your assets can help to mitigate specific risks in the market.

Why Portfolio Diversification Matters

Asset Allocation

Asset allocation uses statistical analysis to manage diversification. Modern Portfolio Theory attempts to construct a portfolio that maximizes the potential for return at each given level of risk. It does this by analyzing each asset class’s historical return, the variability of that return (variance), and the degree to which asset classes go up or down in price at the same time (covariance).

Asset Allocation for Beginners

Stocks

Stocks represent ownership in a corporation. Each share of stock represents a small but equal share in the company. The stocks you can buy are in public companies that have registered their stock with the SEC. Privately held corporations also have stock, but it may not be sold to the public.

What is a Stock?

Bonds

Bonds are loans that can be bought or sold. Each bond represents a promise by the issuer to pay a certain amount of interest and repay the full amount of the debt owed on a specific date in the future. The issuer (borrower) might be the US government, a state or local government, or a corporation. Interest from municipal bonds—those issued by state and local governments—may be exempt from federal income tax and usually tax of the issuing state. US Treasury bonds, bills, and notes are generally exempt from state income taxes. Interest from corporate bonds is fully taxable.

How do Bonds Work?

Volatility

Investments go up and down in value. Some, like stocks of small, speculative companies, go up and down a lot. Others, like high-grade corporate bonds, tend not to move much. Volatility is a measure of how much the price of an investment is likely to move in a given time period. The more volatility the asset has, the riskier it is thought to be. Generally, the more assets in a portfolio, the less the volatility of any one asset impacts the risk of the portfolio.

How Much Stock Market Fluctuation is Normal?

Risk

Investors usually focus on the risk of the value of an asset going down. There is not much we can do about things like wars and natural disasters. However, things like bad management of a company, new competition, and new government regulation can be mitigated. You can diversify your portfolio so things that hurt a particular company, industry, or country don’t wreck your whole financial plan.

What Every New Investor Should Know About Risk

Mutual Funds

Mutual funds are collections of investments that trade as a single security. Think of them as a suitcase full of securities: stocks, bonds, gold, or almost any other legal investment. They can be actively managed or passively invested. The main benefit of a mutual fund is diversification. You can buy shares of one fund and own a tiny amount of many individual stocks or bonds.

How do Mutual Funds Work?

Recession

Normally, a recession is declared when U.S. gross domestic product (GDP)—which represents the total value of goods and services produced in the country—drops for at least two quarters in a row. However, that’s not the only criterion for declaring a recession. For example, some other indicators to describe a recession include: declines in industrial production, falling oil consumption, and increased unemployment for two quarters.

2020 Recession Investing Guide

Ready to learn more?

Here is a basic overview of some very important investing topics:

Investing in Stocks

The market fluctuates every day. Investing in the stock market can be risky, but there is also the chance that you could grow your money. Remember, time in the market beats timing the market. In order to invest in stocks, you’ll need to open an investment account.

You can choose the stocks yourself, or have a professional put together a portfolio for you. Want to learn more? Check out these articles below.

Invest like a pro without being one.

All About IPOs

An Initial Public Offering (IPO) is when a private company goes public and their stock is traded in the market for the first time. It is important to do your research if you want to buy IPO stocks.

Understand when the company you want to invest in is going to IPO, what the stocks are priced at, and when the stocks are available to buy.

Remember that the IPO price and the actual price you’ll pay for the stock can be different—the offering price is a fixed price reserved for a select group of investors. Ready to start investing in IPOs? Dive deeper to gain more knowledge.

Ready to Retire

The ultimate goal is to retire and not have to work anymore. But how do you get there? First, you should calculate how much money you’ll need in retirement and how much you have saved so far. Then, research the different types of retirement plans to decide which one(s) matches your goals.

Understanding the Different Types of Retirement Plans

IRA

An individual retirement account (IRA) is an account that you open and fund yourself, not through an employer. Your contributions to your IRA will not be taxed until they are withdrawn from the account. The contribution limit in 2019 is $6,000, or $7,000 if you are over 50 years old.

How to Open Your First IRA

Roth IRA

A Roth IRA is also a retirement account that you open and fund yourself, not through an employer. The main difference between a traditional IRA and a Roth IRA is that there are income limits to contribute to a Roth IRA and if you are eligible to contribute to a Roth and satisfy the holding period requirements then withdrawals can be made tax-free. That way, when you withdraw money from this account later, it will not be taxed again. The 2019 contribution limit is $6,000, or $7,000 if you are over 50 years old.

What is a Roth IRA?

401(k)

A 401(k) is another type of retirement account, but this one is offered through an employer. Normally employees make pre-tax contributions, but some companies allow you to make after-tax contributions. The contribution limit for 2019 is $19,000 or $25,000 if you are over 50 years old.

How Much Should I Have Saved in My 401k?

Once you’ve decided on the right retirement plan for you, you’ll need to open the account and fund it. Also, you should determine how much you will be contributing on an ongoing basis.

$100/month? $100/week? Contribution amounts will differ by financial situation, so take some time to figure out what works best for you. For more information on retirement, check out the articles and tools below.

Crazy About Crypto

Thinking about including cryptocurrencies in your strategy? We’ve got resources for you. From bitcoin to litecoin to ethereum, there are a ton of cryptos you choose from.

Since cryptocurrencies are volatile and involve a high degree of risk, it can be a good idea to do some research on these various cryptos to understand which ones you want to buy.

Want more info on cryptocurrencies? Check out the articles below.

SoFi Invest

Ready to start investing? SoFi offers both active and automated investing.

With active investing you can trade stocks and ETFs yourself, and with automated investing we will build a portfolio for you based on your goals. Plus, you’ll pay $0 in SoFi management fees.

Want more investing options? With SoFi Stock Bits, you can start investing in your favorite companies with as little as $1. That way you can start investing in a lot of companies without a lot of dollars.*

Learn more about your investing options or get started now!

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