Aggressive Investors Could Like SoFi Stock While Its ETFs Offer Alternative

I recently wrote about 10 exchange-traded funds to buy. In doing my research, I took a closer look at the ETF offerings from SoFi Technologies (NASDAQ:SOFI). While I’ve been a fan of SOFI stock for some time, I’d never really considered any of its funds for inclusion in any of my ETF-related articles. 

the Social Finance (SoFi stock) logo is displayed on a smartphone.
Source: rafapress / Shutterstock.com

That changed on Feb. 11 when I included the SoFi Next 500 ETF (NYSEARCA:SFYX) in my article 10 ETFs to Buy During the Current Market Correction

As SoFi continues to grow its product offerings, it only makes sense for many of its 2.9 million members to invest in some of the company’s ETFs. 

However, it got me thinking about the adage that investors should buy a mutual fund provider’s stock rather than its mutual funds. That was because active management historically hasn’t been able to match the returns of passive investing. 

So, the question is whether the same adage applies to SoFi’s ETFs. Should investors buy one or more of SoFi’s ETFs, own SoFi stock, or a combination of both?

SOFI Stock Is for Aggressive Investors Only

As I said in my last article about SoFi stock, I believe that the company will ultimately make money. That makes SoFi an excellent buy for aggressive investors willing to put up with high volatility due to its current lack of profits.

“To many investors right now, a stock like SoFi is the financial services industry’s version of kryptonite,” I wrote on Jan. 28. “That said, I think it’s important to understand the difference between a business throwing ideas at the wall to see if they stick and one with a plan to become a consumer go-to for financial solutions.”

I see SOFI developing into a much better version of Primerica (NYSE:PRI), an insurance company selling financial products and consolidation loans to middle-income America. 

One of the advantages SoFi has over Primerica is that it is more technology-driven. The 2020 acquisition of Galileo for $1.2 billion allowed Sofi to accelerate its move into mobile financial services. 

Now that it has a national bank charter, it will leverage back-end technology expertise to quickly launch new products that its millions of members need and want. 

As for Galileo’s shareholders, they received SOFI stock for almost three-quarters of the sale price. So you can be darn sure they believe SOFI stock ought to be in the aggressive investor’s portfolio.

What About the SoFi ETFs?

As I said in the intro, I recommended SFYX, in part because it was down 8.3% on the year. Buy-on-the-dip investing makes a lot more sense with ETFs than it does with individual stocks. 

As for SFYX’s focus on mid-cap growth stocks, they might be out of favor at the moment, but over the long haul, they’ll do just fine. Three top holdings among its more than 480 stocks include Datadog (NASDAQ:DDOG), Medical Properties Trust (NYSE:MPW), and Apollo Global Management (NYSE:APO). It currently charges zero fees and has $48.3 million in total assets. So if you want a growth component in your portfolio, the fees alone should make you consider it. 

Another interesting ETF is the SoFi Social 50 (NYSEARCA:SFYF). It, too, is a growth-focused ETF. It invests in the 50 most-widely held stocks by SoFi Invest clients. The ETF charges 0.29%. Its top three holdings are Apple (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) and Microsoft (NASDAQ:MSFT).

It also holds popular meme stocks such as GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC). I’m not a fan of either of those stocks. However, with 50 others, the diversification reduces the company-specific risk associated with those two.

In total, SoFi offers six ETFs. It wouldn’t surprise me if it acquired a thematic-based ETF provider in the future. 

The Bottom Line

If you’re toying with the idea of buying SOFI stock, but you’re not an aggressive investor, perhaps you might split the investment in half, buying 50% in SOFI shares through SoFi Invest (they offer fractional shares) and 50% in the no-fee SoFi Next 500 ETF. That lowers your risk profile considerably.

For those that are aggressive, I continue to believe SOFI stock is an excellent long-term buy.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. 


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