Mar
25
2025

Can You Use Your IRA to Invest in Real Estate?

By | invest, Investing, Preparing for Retirement, Real Estate | Comments Off on Can You Use Your IRA to Invest in Real Estate?

There are a couple of ways to use an IRA to invest in real estate. First, you can invest in mutual funds, exchange-traded funds (ETFs), or real-estate investment trusts (REITs) that focus on real estate investments within an IRA.

It’s also possible to set up a self-directed IRA, or SDIRA, that can own physical real estate, as well as other types of alternative investments.

Using an IRA to invest in real estate property directly, however, is a complicated and potentially risky proposition. It’s important to understand the many rules and restrictions, as well as the potential advantages and disadvantages of investing in real estate in an IRA before doing so.

Key Points

•   It’s possible to invest in real estate in an IRA via conventional methods, such as buying shares of a mutual fund, ETF, or REIT.

•   Direct ownership of physical property using an IRA means setting up a self-directed IRA, or SDIRA, which requires a specialized custodian, not an ordinary broker.

•   While a SDIRA gives investors the ability to invest in alternative investments (such as real estate, commodities, and precious metals), the account holder must oversee and manage the account and all investments.

•   Investing in real estate in an IRA comes with stringent rules, including that neither the investor nor anyone in their family can own or live in the property.

•   Investors considering investing in real estate through a SDIRA should weigh their risk tolerance, overall portfolio allocation, and the potential time commitment involved.

Can You Invest in Real Estate Using an IRA?

IRAs can offer a wide variety of investment opportunities, including those that target the real estate sector. While conventional investment options within an IRA are often confined to equity and fixed-income mutual funds, exchange-traded funds (ETFs), and index funds, it is in fact possible to use an IRA to invest in real estate in various ways.

Investing in real estate may be appealing to some investors because this asset class tends not to move in sync with traditional stock and bond markets; thus real estate may provide portfolio diversification. Some real estate investments also offer the potential for passive income.

But real estate is a type of alternative investment, and as such tends not to be very liquid, which may present risks for some investors.

Ways to Invest in Real Estate With an IRA

Here are some choices investors can consider for IRA real-estate investments. But not all types of real estate can be held in any type of IRA:

•   Real estate mutual funds, real estate-focused exchange-traded funds (ETFs), real estate investment trusts (REITs) are typically available through a traditional, Roth, SEP, or SIMPLE IRA.

•   Investing directly or owning residential and commercial investment properties, tax-lien certificates, crowdfunded real estate investments typically require a self-directed IRA or SDIRA (see detail below).

1. Real Estate-Related Funds

Like any type of mutual fund, real estate funds hold a basket of investments. Real estate mutual funds tend to be actively managed funds that may hold shares of real estate-related stocks, REITs, or they may track an index.

A real estate index fund, for example, seeks to mimic the performance of a market benchmark or index.

ETFs, meanwhile, are pooled investments similar to mutual funds, but are traded on an exchange like stocks, so they offer more liquidity. ETFs may also hold real-estate related investments — typically shares of REITs.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA online and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

2. Real Estate Investment Trusts

Investors can also invest in Real estate investment trusts (REITs) directly. REITs own and manage properties on behalf of investors. REITs can target a specific niche or segment of the real estate market, such as retail shopping centers or storage facilities. Or they might hold a wide mix of property investments, including residential rental properties, office buildings, and industrial warehouses.

Dividends are often at the top of the list of benefits when weighing the pros and cons of REITs. They’re required to pay out 90% of profits to shareholders as dividends, making them a potentially reliable source of passive income.

Some of the advantages of REITs include passive income from dividends, and portfolio diversification, but these vehicles come with a number of risks. Potential risks include less liquidity and sensitivity to interest rates, as well as other factors that can negatively impact real estate markets: i.e., consumer trends, property destruction (from wear and tear, or weather), local laws and regulations.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

3. Investment Properties

It’s also possible to own investment properties directly, such as commercial and residential real estate, among other types of properties. Investment properties can generate passive income through rent payments, and they may offer a profit when sold.

But investment properties typically require an upfront investment of capital, managing a mortgage, and ongoing maintenance that may be beyond the reach of most investors.

4. Tax-Lien Certificates

Tax-lien certificate investing involves buying liens that have been placed against properties in connection with unpaid tax debts. The holder of the certificate can collect interest while the property owner repays the debt. If the owner defaults on the debt, the certificate holder can take ownership of the property.

These are high-risk instruments, typically owing to the potential for losing money on tax payments and low-quality properties that don’t yield a profit.

5. Real Estate Crowdfunding

Real estate crowdfunding platforms, also known as online real estate platforms, allow a number of investors to purchase property by pooling their investment funds. Depending on which platform you’re using, the minimum investment could be as low as $500, but terms vary and the risks can be high.

Crowdfunding is even less liquid than many other types of real estate investments, since there’s typically a minimum holding period — which means investors’ money can be tied up for long periods, and there is no guarantee that a certain property or properties will turn a profit.

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1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

What IRAs Can You Use to Invest in Real Estate?

If you’re interested in real estate funds or REITs, you may be able to invest in these through a traditional, Roth, SEP, or SIMPLE IRA. Many brokerages include real estate funds and REITs as investment options for ordinary IRA investors.

On the other hand, if you’re specifically interested in property investments or tax-lien certificates — i.e., directly investing your IRA in real estate — you’ll need to open a self-directed IRA (SDIRA) instead.

What Is a Self-Directed IRA?

A self-directed IRA is a traditional or Roth IRA that’s held by a specialized custodian that allows investors access to a broader range of investments, including alternative investments like real estate.

Unlike ordinary IRAs which are overseen by a broker, all assets in a SDIRA are researched and managed by the account holder.

Self-directed IRAs are subject to a number of IRS restrictions. Many of these rules also apply to ordinary IRAs, but it’s important to bear them in mind when thinking about investing your IRA in real estate. Specifically, you’re barred from:

•   Transacting with disqualified persons. These include your spouse and any family members, as well as your IRA beneficiary if they don’t fit either of those categories. The prohibition also extends to any business entity that’s owned by a disqualified person.

•   Using the IRA or investments in the IRA for personal benefit. Using an IRA for personal benefit in any way is not allowed. For example, if you’re collecting rental income from a property you own in the IRA, you have to deposit any profit into the IRA, along with any other income generated by self-directed IRA assets.

•   Making disallowed investments. Finally, there are some limits on what you can own in a self-directed IRA. Disallowed investments include life insurance, collectibles, and business interests in S-corporations. Transactions that count as “self-dealing” are also prohibited: i.e., borrowing money from a SDIRA, selling property to it, using it as loan collateral.

Note: While the IRS permits using an IRA to buy a first home, that doesn’t apply to self-directed IRAs.

Steps to Buying Real Estate With an IRA

If you’d like to invest in property or tax lien certificates with an IRA, you need to set up a self-directed IRA, and then purchase the property or similar investment through the SDIRA . Because it can be very difficult to secure a mortgage for this kind of purchase, most direct property purchases are paid for with cash from the SDIRA.

1. Find a Custodian

The first thing you’ll need to do is find a qualified custodian that offers self-directed IRAs for real estate investment. When researching custodians, it’s a good idea to consider their reputation in the space, customer service and satisfaction, as well as the fees you’ll pay.

2. Open a Self-Directed IRA

Once you select a custodian, you can open your SDIRA. Your custodian should be able to guide you through this process, which usually involves completing the appropriate paperwork.

Remember, you’ll need to specify whether you’d like to open a traditional or Roth self-directed IRA. Traditional IRAs allow for tax-deductible contributions, while Roth SDIRAs can offer qualified withdrawals tax free in retirement.

Your custodian may give you the option (or require you) to establish a self-directed IRA as a limited liability company (LLC). Doing so can offer an advantage, since it allows you to have full control with regard to signing authority over IRA funds.

However, setting up an LLC real estate IRA can trigger additional IRS rules against prohibited transactions.

3. Deposit Funds to Your IRA

The next step is transferring funds into your self-directed IRA. That may be as simple as scheduling an electronic transfer from a bank account. You can also roll funds over from a 401(k) or another eligible plan.

Keep in mind that self-directed IRAs follow the same annual contribution limits as other IRAs, but those limits do not apply to IRA rollovers.

4. Compare Investment Options

Once you have money in your self-directed IRA, you’ll need to decide how you want to invest it. If you’re focused on real estate, that might mean purchasing an investment property. It’s important to perform due diligence to find a property that aligns with your investment needs, goals, and risk tolerance.

Remember that self-directed IRA investment options can include:

•   Single-family or multifamily homes

•   Commercial and rental properties

•   Land

•   Tax liens

•   Mortgage notes

Each one can have a different risk/reward profile so it’s important to understand what you might gain from each one and what you may stand to lose. It’s also a good idea to consider how much of your self-directed IRA funds, and your portfolio as a whole, you’d like to allocate to real estate.

5. Purchase a Property

If you’re investing in a rental property and you’ve found one you want to buy, the final step is making the purchase. You’ll need to make an offer and once that’s accepted, you’ll need to authorize your IRA custodian to complete the transaction on your behalf. That’s important, as the property needs to be held in contract by the IRA, rather than yourself.

Pros and Cons of Investing Your IRA in Real Estate

Investing an IRA in real estate can yield some advantages but there are some serious considerations to keep in mind.

While you can use a self-directed IRA to hold real estate, which may offer some tax advantages, it’s important to know the rules so you don’t risk losing those benefits. Also, keep in mind that holding real estate inside a self-directed IRA can mean missing out on some tax advantages you’d get by owning property directly.

A self-directed IRA can offer high return potential but that means doing your homework first to find solid investments. You’ll need to spend some time researching properties to ensure that you understand the risks, as well as the level of returns you might be able to expect.

Managing a self-directed IRA may be more time-consuming than investing in a regular IRA, especially if you’re not hiring a property manager to oversee property investments. Self-directed IRAs offer less liquidity and depending on which custodian you choose, the fees may be high.

thumb_upPros:

•   Potentially for returns

•   IRA-related tax benefits

•   Diversification

•   IRAs are protected from creditors

thumb_downCons:

•   Physical real estate is subject to numerous risks

•   Stringent rules and requirements

•   Less liquid than other investments

•   Time-consuming to set up and manage

•   Fees may be high

Is Investing Your IRA in Real Estate Right for You?

Deciding whether to invest in real estate with your IRA can start with reviewing your portfolio as a whole. Here are some questions to consider:

•   Do you already own any real estate investments, including REITs or index funds?

•   If so, how much of your portfolio is allocated to real estate?

•   How much time and effort do you have to put into managing real estate investments?

•   How much money are you able to invest?

•   Do you have a trusted custodian and if not, do you know where to find one?

•   What degree of risk are you willing to take and what kind of returns are you hoping to earn?

•   Asking those kinds of questions can help you to evaluate where real estate fits into your investment plans and whether a self-directed IRA is the best option for you.

Alternative IRA Investment Options

In addition to real estate, you can also hold a wide variety of other alternative investments in a SDIRA.

•   Commodities

•   Gold and other precious metals

•   Limited partnerships

•   Private equity

Remember that the IRS bars you from owning things like artwork, antiques, rare coins or stamps, and fine wine in a self-directed IRA.

The Takeaway

Opening an IRA for real estate investing could be worth the effort if you’re hoping to diversify your portfolio beyond stocks and bonds, but it requires opening a specific type of IRA called a self-directed IRA, or SDIRA. This type of IRA isn’t available from a traditional broker, because you can use a SDIRA to hold alternative investments, such as real estate and commodities.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


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FAQ

Can I invest in real estate using my IRA?

You can invest in real estate using a self-directed IRA, or SDIRA. This type of IRA is held by a custodian and allows you to choose from a wider range of investment options than regular IRAs. With a self-directed IRA, you can own rental properties, mortgage notes, and tax lien certificates.

How is real estate taxed in an IRA?

Real estate held in an IRA is subject to the tax rules that apply to the type of IRA. For example, if you have real estate in a traditional SDIRA then any earnings or income generated by those investments would grow tax-deferred. You’d pay ordinary income tax on them when you make qualified withdrawals in retirement. A Roth-style SDIRA would provide tax-free income on qualified withdrawals. Owing to the complexity of self-directed IRAs to begin with, it might make sense to consult a professional regarding tax implications.

What type of real estate can be held in an IRA?

A self-directed IRA can hold residential rental properties, commercial real estate investment properties, tax lien certificates, and mortgage notes. If you have a regular traditional or Roth IRA, you can use it to invest in real estate funds, ETFs, or REITs.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/boonstudio

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.


Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Mar
25
2025

How To Invest in Publicly Traded Sports Teams

By | Growing Wealth, invest, Investing | Comments Off on How To Invest in Publicly Traded Sports Teams

Owning a professional football or baseball team is well out of reach for the average investor, but owning a piece of one isn’t. Publicly traded sports teams offer investors exposure to the world of alternative investments without requiring you to bring billions to the table.

If you have a brokerage account you may be able to invest through the wide world of sports. Here’s a look at how it works to invest in publicly traded sports teams.

Key Points

•   Investing in publicly traded sports teams allows individuals to engage with their passions and diversify their portfolios through publicly traded teams.

•   U.S. sports leagues like the NBA, NHL, and MLB have publicly traded teams, while international options include Manchester United and Borussia Dortmund.

•   Key factors to consider before investing in sports teams include team management, ownership structure, financials, and performance record.

•   Risks include stock price fluctuations, potential privatization, and significant debt loads affecting financial stability.

•   Investment strategies may include buying shares through brokerages or investing in sports-focused ETFs for diversified exposure.

Understanding Sports Team Ownership Structures


Sports team ownership structures vary by organization and franchise. Major and minor league teams can be owned by:

•   A single individual

•   A family or family trust

•   Corporations

•   Limited liability companies (LLCs)

•   Partnerships

•   Private equity firms

Some teams have mixed ownership, meaning there are multiple owners, which can include a mix of individuals or entities. The controlling owner may be an individual or family who owns a majority share, with the rest distributed among other owners that were interested in investing.

There may be limits on what percentage of ownership an individual or entity can have in such a structure. For example, the National Football League (NFL) approved a vote in 2024 to allow private equity funds to buy stakes in teams. Private equity is capped at 10% of total ownership and controlling owners must have at least 30% ownership.

What Is a Publicly Traded Sports Team?


Most sports teams are privately owned following one of the ownership structures listed previously. Publicly traded sports teams are teams that are owned by corporations that may or may not make their shares available to trade on stock exchanges.

Current Publicly Traded Teams


A handful of professional sports teams are publicly traded. If you’re interested in how to invest in sports teams here are the companies you might choose from.

•   Atlanta Braves. The Braves baseball team is owned by Atlanta Braves Holdings, Inc. (BATRA), which also operates mixed-use development projects. BATRA is traded on the Nasdaq Select Global Market.

•   Toronto Blue Jays. Rogers Communications (RCI) owns the Blue Jays and is a leading provider of wireless service in Canada. RCI is traded on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

•   New York Knicks. Madison Square Garden Sports Corp. (MSGS) owns and operates the New York Knicks. Shares are traded on the NYSE.

•   New York Rangers. MSGS also owns and operates the New York Rangers hockey team.

•   Manchester United. The Manchester United Football Club is owned by Manchester United plc. The stock trades on the NYSE using the ticker symbol MANU.

•   Borussia Dortmund. Borussia Dortmund is a publicly traded sports team that trades on the German stock exchange. Its ticker symbol is BVB.

The Green Bay Packers, a professional football team playing in the NFL, are often included in the discussion about publicly traded sports teams, too. But while the team is publicly owned, it is not publicly traded. The team has, in the past, offered stock sales, and is a nonprofit organization.

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.

Strategies for Investing in Sports Franchises


There are several ways to invest in sports teams. The simplest path may be investing in sports by purchasing shares through a brokerage.

You’ll need to open a brokerage account if you don’t have one already, and deposit funds to trade. Once your account is set up you can buy and sell shares of publicly traded sports teams the way you would any other stock. Some brokerages also offer access to alternative investment funds, such as commodities or currencies.

If you don’t want to tie up all of your investment dollars in a single team, sports-focused ETFs are another option. These are thematic ETFs that allow investors to own a basket of investments in a single fund. Funds may be focused on:

•   Sports betting

•   Digital sports entertainment, including esports and gaming

•   Sports broadcasting

•   Sports and athletic technology, such as wearables

•   Energy drinks or foods that are marketed to athletes

Real estate investment trusts (REITs) are another opportunity to invest in sports, albeit not necessarily sports teams per se. REITs own and operate real estate properties, which can include sports stadiums, arenas, and training facilities. Investing in sports REITs can diversify your portfolio while generating passive income through dividends.

Private equity may also be an option, depending on your situation. Private equity involves investment in sports companies that are not publicly traded. Investing in private companies can be lucrative but the barrier to entry is often high, as you may need to be an accredited investor to qualify.

SEC guidelines consider you to be an accredited investor if you:

•   Have a net worth greater than $1 million, excluding the value of your primary residence

•   Earned $200,000 or more ($300,000 with a spouse or partner) for the previous two years and expect the same level of income for the current year.

If you don’t meet those requirements there’s another option. You could invest in private equity ETFs that have a sports focus. This alt investment guide offers a closer look at how nontraditional assets like private equity work.

Risks and Challenges in Sports Team Investing


Investing in sports has risks like any other investment. Weighing them carefully can help you decide if it makes sense to invest with sports.

Here are some of the biggest challenges and associated risks associated with investing in sports teams:

•   Stock prices of publicly traded sports teams (or their parent organizations) can fluctuate widely, based on how well the team performs.

•   A team that’s publicly traded today may not be tomorrow if the team is sold to a new owner who decides to make it private.

•   Sports teams can generate huge profits but they can also carry significant debt loads, which can affect their financial health and stability.

•   Investing in sports REITs can generate passive income but those investments often lack liquidity.

•   Private equity often has higher barriers to entry and may carry more risk than other sports investments.

Before investing in sports it’s helpful to review your current asset allocation and risk tolerance. That can help you decide how much of your portfolio to allocate to sports investments.

Recommended: Alternative Investment Definition

The Takeaway


Investing in sports is an opportunity to put your money where your passions are and diversify your portfolio. Comparing different investment paths can help you decide which one makes the most sense for you. And remember that if you’re interested in trading sports stocks, it’s easy to open a brokerage account and start investing online.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.


Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Which sports leagues have publicly traded teams?

In the U.S., the NBA, NHL, and MLB all have at least one publicly traded sports team on the stock market. While the Green Bay Packers are publicly owned and offer periodic sales of shares, they are not publicly traded.

Can I invest in international sports teams?

There are at least two international sports teams that are publicly traded. They are the Manchester United Football Club and Borussia Dortmund, a German football club and sports club.

What factors should I consider before investing in a sports team?

Some of the most important factors to consider before you invest in sports teams are the team’s management, its ownership structure, and its financials. It’s also wise to look at the team’s performance record, as that can influence how it’s valued at any given point in time.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/simonkr

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Claw Promotion: Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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25
2025
Why Index Fund Returns Vary from Fund to Fund

Why Index Fund Returns Vary from Fund to Fund

By | Growing Wealth, invest, Investing | Comments Off on Why Index Fund Returns Vary from Fund to Fund

The performance of index funds can vary based on which index the fund tracks and how the stock market performs as a whole. Index funds can offer a simplified approach to portfolio building when the primary goal is to meet, rather than beat, the market’s performance.

In simple terms, these mutual funds or exchange-traded funds (ETFs) seek to track the performance of a particular stock market index or benchmark. While these funds can offer some insulation against volatility, it’s important to understand which factors drive index funds returns.

What are Index Funds, Exactly?

An index fund is a type of mutual fund that’s designed to track the performance of a stock market index, by investing in some or all of the securities tracked by that particular index.

An index represents a collection of securities, which may include stocks, bonds, and other assets. Stock indexes can cover one particular sector of the market or a select grouping of companies. Examples of well-known stock indices include the S&P 500 Index and the Russell 2000 Index.

What Determines Index Fund Returns?

Even though they tend to have a similar purpose and function inside a portfolio, the return on index funds isn’t identical from one fund to the next. Some index funds can lose money, too. Factors that can influence index funds’ returns include:

•   Which specific index they track

•   Whether that index is:

◦   Cap-weighted, in which each security is weighted by the total market value of their shares.

◦   Price-weighted, in which the per share price of each security in the index determines its value.

◦   Equal-weighted, in which all of the securities being tracked are assigned an equal weight for determining value.

•   Number of securities held by the fund

•   Geographic classification of fund securities

•   Expense ratio and fees

•   Overall market conditions

•   Tracking error

Together, these factors can influence how well one index fund performs versus another.

Index Tracking

First, consider which benchmark an index fund tracks. There can be significant differences in the makeup of various indexes. For instance, the S&P 500 covers the 500 largest publicly traded companies while the Russell 2000 Index includes 2000 small-cap U.S. companies.

Large-cap stocks can perform very differently from small-cap stocks, which translates to differences in index fund returns. Between the two, large-cap companies tend to be viewed as more stable while smaller-cap companies are seen as riskier. Large-cap companies may fare better during periods of increased market volatility but in an extended downturn, small-cap companies may outperform their larger counterparts.

Index Weighting

Cap-weighted, price-weighted, and equal-weighted indexes all have the potential to perform differently, because each company’s stock may have different weight in each of these types of funds. For example, if a stock in an equal-weighted index filled with 500 stocks performs poorly, those shares represent 1/500th of performance. On the other hand, if the same stock performs poorly in a cap-weighted fund and it happens to have a very high market cap, it may represent a larger percentage of performance.

For these reasons, it’s also important to know how many securities are held by the fund. The more financial securities in a given fund, the greater the likelihood that a poorly performing one will be balanced by others.

Geographic Classification

Even when two index funds both follow the same formula with regard to market capitalization, returns can still differ if each fund offers a different geographic exposure. For example, a fund that tracks a global market index and includes a mix of international and domestic stocks may not yield the same results as an index fund that focuses exclusively on U.S. companies.

Funds that track global indexes can also differ when it comes to how they characterize certain markets. For instance, what one fund considers to be a developed country may be another index fund’s emerging market. That in turn can influence index fund returns.

Expense Ratio and Fees

Index funds are generally passive, rather than active, since the turnover of assets inside the fund is typically low. This allows for lower expense ratios, which represent the annual cost of owning a mutual fund or ETF each year, expressed as a percentage of fund assets. Generally, index funds carry lower expense ratios compared to actively managed funds but they aren’t all the same in terms of where they land on the pricing spectrum.

The industry average expense ratio for index funds tends to be a bit more than 0.5%, though it’s possible to find index funds with expense ratios well below that mark. The higher the expense ratio, the more you’ll hand back in various fees to own that index fund each year, reducing your overall returns.

In terms of fees, some of the costs you might pay include:

•   Sales loads

•   Redemption fees

•   Exchange fees

•   Account fees

•   Purchase fees

When comparing index fund costs, it’s important to keep the expense ratio, fees, and historical performance in mind. Finding an index fund with an exceptionally low expense ratio, for instance, may not be that much of a bargain if it comes with high sales load fees. But a fund that charges a higher expense ratio may be justifiable if it’s consistently outperformed similar index funds year over year.

Tracking Error

Tracking errors can significantly impact your return on index funds. This occurs when an index fund doesn’t accurately track the performance of its underlying index or benchmark.

Tracking errors are often tied to issues with the fund, rather than its index. For example, if a fund’s composition doesn’t accurately reflect the composition of the index it tracks then performance results are more likely to be skewed. Excessive fees or a too-high expense ratio can also throw a fund’s tracking off.

What Are Good Index Fund Returns?

What is a good return on investment for an index fund? Given that the return on index funds can vary, the simplest answer may be to look at the stock market’s historical performance as a whole.

The S&P 500 Index is often used as a primary market benchmark for measuring returns year over year. The average annualized return for the S&P 500 Index since its inception — including dividends and adjusted for inflation — is 8.7%. Following that logic, a good return on investment for an index fund would be around the same.

You could also use the fund’s individual index as a means of measuring its performance. Comparing the fund’s performance to the index’s performance month to month or year over year can give you an idea of whether it’s living up to its expected return potential.

Are Index Funds a Good Investment?

Index funds may appeal to one type of investor more than another, which is why it’s always important to do your research before determining what will be a good fit for your portfolio.

Investors who prefer a low-cost, passive approach may lean toward index investing for growing potential for wealth long-term. Index funds can offer several advantages, including simplified diversification and consistent returns over time.

For example, if your investment goals include keeping costs low while producing consistent returns with lower fees, then index investing maybe a good choice. You may also appreciate how easy it is to buy index funds or ETFs and use them to create a diversified portfolio.

Index funds can help with pursuing a goals-based investing approach, which focuses on investing to meet specific goals rather than attempting to beat the market. When comparing index funds, pay attention to the fund makeup, its costs, historical performance, turnover ratio and the potential for tracking errors.

The Takeaway

A number of factors helps explain why different index funds have different returns — including, but not limited to, which index they track and how it’s weighted, the geographic classification of the fund securities, expense ratios, and overall market conditions.

But keep in mind: Unless you have a crystal ball, there’s no way to predict exactly how an index fund will perform. But getting to know what differentiates one index fund or ETF from the next can help with making more informed decisions about which ones to buy.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

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Income-Contingent Repayment Plan, Explained

By | Debt Payoff, Student Loans, student_loan | Comments Off on Income-Contingent Repayment Plan, Explained

Income-contingent payment (ICR) plans are one kind of Income-driven repayment plan, which can help make federal student loan payments more affordable. The income-contingent repayment plan allows you to extend your loan repayment period while reducing monthly payments to help them better align with your income. Any remaining loan amounts due at the end of your ICR plan term may be forgiven.

An ICR may be a good fit if you’re just starting your career and aren’t earning a lot of money. You may also consider an income-contingent repayment plan if you’re hoping to qualify for federal Public Service Loan Forgiveness (PSLF).

But is an ICR plan right for you? And what are the pros and cons of income-contingent repayment? Weighing the benefits alongside the potential downsides can help you decide if it’s an option worth pursuing managing your student loan debt.

What Is Income-Contingent Repayment (ICR)?

Income-driven repayment plans, including ICR, determine your monthly payment amount based on your household size and income. Depending on how much you make and how many people there are in your household, it’s possible that you could have no monthly payment at all.

Like other income-driven repayment plans offered by the Department of Education (DOE), an ICR plan aims to make it easier to keep up with federal student loan payments.

With income-contingent repayment, your monthly payments are capped at the lesser of:

•   20% of your discretionary income

•   What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted for your income

Of the four income-driven repayment options, income-contingent repayment is the oldest plan, and it is the only one that sets the payment cap at 20% of a borrower’s discretionary income. With income-based repayment (IBR) and Pay as You Earn (PAYE), monthly student loan payments max out at 10% of your discretionary income. The Department of Education recently introduced a new IDR plan called Saving on a Valuable Education (SAVE), and starting in July 2024, borrowers on the SAVE plan could see their payments reduced from 10% to 5% of income above 225% of the poverty line.

The interest rate for an ICR plan stays the same for the entire repayment term. The rate would be whatever you’re currently paying for any loans you’ve consolidated or the weighted average of all loans you haven’t consolidated.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

How an ICR Plan Works

Income-contingent repayment can reduce your federal student loan payments, allowing you to pay 20% of your discretionary income each month or commit to making fixed payments based on a 12-year loan term.

You have up to 25 years to repay all loans enrolled in the plan. If you still have remaining payments after 25 years of monthly payments, the DOE will forgive the balance. But while you may not owe any more payments on the loan, the IRS considers student loan debts forgiven through ICR or another income-driven repayment plan to be taxable income, so you may owe taxes on it.

Income-contingent repayment plans base your monthly payment on your income and family size. This means that if your income, or your family size, changes over time, your monthly payments could change as well. With all of the federal IDR plans, borrowers must recertify their loan every year to show any changes to your income or family size.

If you’re enrolled in the 10-year Standard Repayment Plan, your monthly payments would be the same for the entire repayment term, and you never have to recertify your loan.

Here’s an example of what your payments might look like on an ICR plan versus a Standard Repayment plan, assuming you’re single, make $50,000 a year, get 3.5% annual raises, and owe $35,000 in federal loans at a weighted interest rate of 5.7%.

Standard

 ICR Plan

 Savings
First month’s payment $383 $319 $64
Last month’s payment $383 $336 $47
Total payments $45,960 $49,092 -$3,132
Repayment term 10 years 12.4 years -2.4 years

As you can see, an income-contingent repayment plan would lower your monthly payments. But it will take you longer to pay your loans off and you pay more than $3,000 in additional interest charges over the life of the loan. If you start earning more while you’re on the ICR plan, your payments could also increase.

If you get married, and you and your spouse file your taxes jointly, your loan servicer will use your joint income to determine your loan payment. If you file separately or are separated from your spouse, you’ll only owe based on your individual income.

Recommended: How is Income Based Repayment Calculated?

Who Is Eligible for an Income-Contingent Repayment Plan?

Anyone with an eligible federal student loan can apply for the income-contingent repayment plan. Eligible loans include:

•   Direct student loans (subsidized or unsubsidized)

•   Direct consolidation loans

•   Direct PLUS loans made to graduate or professional students

Other types of federal student loans may also be enrolled in income-contingent repayment plans if you consolidate them into a Direct loan first. For example, you could use an ICR plan to repay consolidated:

•   Federal Stafford loans (subsidized or unsubsidized)

•   Federal Perkins loans

•   Federal Family Education Loan (FFEL) PLUS loans

•   FFEL consolidation loans

•   Direct PLUS loans for parents

The income-contingent repayment is the only income-driven repayment plan option that includes loans taken out by parents. So if you borrowed federal loans to help your child pay for college, you could enroll in an ICR plan (after consolidating your loans) to make the payments more manageable.

Two types of loans are not eligible for income-contingent repayment or any other income-driven repayment plan:

•   Private student loans

•   Federal student loans in default

If you’ve defaulted on your federal student loans you must first get them out of default before you can enroll in an income-driven repayment plan. The DOE allows you to do this through loan consolidation and/or loan rehabilitation. Either one can help you get caught up with loan payments and loan rehabilitation will also remove the default from your credit history.

Pros and Cons of ICR Plans

Income-contingent repayment is just one option for paying off student loans, and it may not be right for everyone. It’s important to look at both the advantages and potential disadvantages before enrolling in an ICR plan.

Pros of income-contingent repayment:

•   Can lower your monthly payments

•   Parent loans are eligible for income-contingent repayment, after consolidation

•   Extends the loan term to 25 years to repay student loans

•   Remaining loan balances are forgivable

•   Qualifying repayment plan for PSLF

Cons of income-contingent repayment:

•   Other income-driven repayment plans like PAYE or SAVE base monthly payments on 5 to 10% of your discretionary income

•   Taking longer to repay loans means paying more in interest

•   If your income changes, your payments could increase

•   Enrolling certain loans requires consolidation first

•   Forgiven loan amounts are taxable

If you’re interested in an income-driven repayment plan, it may be helpful to do the math first to see how much you might pay with different plans. An income-based repayment option, for example, might lower your payments even more than ICR so it’s worth running the numbers through a student loan repayment calculator.

The Takeaway

Income-contingent repayment plans are something you might consider if you have federal student loans. With an ICR plan, your monthly payments may be lower than they are with the Standard Loan Repayment Plan, allowing you more money for other bills.

You won’t receive a lower interest rate when you sign up for an income-driven repayment plan. The only way to change your interest rate is through student loan refinancing. But if you refinance your federal loans, you will lose access to benefits like ICR and other income-driven repayment plans.

When you refinance student loans, you take out a new loan to pay off your existing ones. If you’re able to secure a lower interest rate on the new loan and don’t extend the term length of the loan, you could pay less in total interest over the life of the loan while having lower monthly payments. This could give you more breathing room in your budget. If you have both federal and private loans, you may choose to place the federal loans in an income-driven repayment plan and then refinance the private loans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.



SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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International IPOs for International Investors

International IPOs for International Investors

By | Growing Wealth, invest, Investing | Comments Off on International IPOs for International Investors

Private companies often choose to go public in the country that offers the brightest prospects for a successful IPO. Sometimes, that means getting listed on a stock exchange in the company’s home country — but sometimes it makes more sense to list in a foreign market.

So, while many U.S. investors focus primarily on domestic companies, it’s also possible to invest in an international IPO.

Likewise, foreign companies can choose to launch their IPO on U.S. stock exchanges, such as the New York Stock Exchange (NYSE) or Nasdaq. And in some cases, a company could choose to do both through a global IPO.

Investing in IPOs, international or domestic, may appeal to certain investors who want more geographic diversity within their portfolio, and understand the risks of doing so. Knowing how these IPOs work and where to find them is the first step.

What Are International IPOs?

An international IPO is an initial public offering from a private company that takes place outside of that company’s home country. For example, a company based in South Korea decides to go public but instead of listing on the Korea Exchange (KRX), it wants to list on an American exchange.

If the company successfully meets the regulatory requirements established by the Securities and Exchange Commission (SEC), it could move forward with an international IPO. International investors could then purchase shares of the company once it begins trading on the NYSE or Nasdaq.

In most cases, an investor must apply or qualify to buy IPO shares through their brokerage, as these stocks can be restricted in certain ways, limited in quantity, and come with a much higher risk level than other types of stocks.

There are a number of reasons and companies may choose an international IPO. Those include:

•   More lenient regulatory requirements for securities on a foreign exchange than those of the home country.

•   Better prospects for raising capital through an IPO on a foreign exchange.

•   More credibility versus listing on its home country’s exchange.

The most important thing to keep in mind with foreign companies that list on U.S. stock exchanges is that they must complete the IPO process just like a domestic company would.


💡 Quick Tip: IPO stocks can get a lot of media hype. But savvy investors know that where there’s buzz there can also be higher-than-warranted valuations. IPO shares might spike or plunge (or both), so investing in IPOs may not be suitable for investors with short time horizons.

Understanding IPOs

When discussing IPOs, “international” refers to public launches involving companies that are foreign to the market they plan to list in. But what is an IPO in general?

In simple terms, an IPO represents the first time that a private company allows investors to purchase shares on a public stock exchange.

Why do companies choose to go public? The answer can depend on the company and its overall business plan. In most cases, the answer is to raise capital so the company can continue to grow and expand. Companies don’t enter into the IPO process lightly, however, as it can be time-consuming and costly.

In the United States, the SEC regulates the IPO process. An IPO can take upwards of a year to complete, as the company moves through the various phases, including:

•   Due diligence

•   SEC review

•   Road show

•   Valuation

•   Launch

International IPO Funds

With domestic companies, it’s possible to purchase IPO stock on the day the company goes public, using an online brokerage account. In the case of companies that offer pre-IPO placements, it may also be possible to purchase shares before they’re made available to the market at large. Effectively, you’re investing in a private placement.

When investing in international IPOs, you may choose to invest through IPO mutual funds or international exchange-traded funds (ETFs) instead. You might go this route if you want more diversification, or if you don’t have access to IPO shares.

When comparing international IPO ETFs or international mutual funds, it’s important to consider a few things, including:

•   Underlying holdings (i.e. which sectors does the fund include, what countries does it offer exposure to)

•   Expense ratios

•   Management style (i.e. active versus passive)

With either type of fund, you’d also want to consider the track record and performance, particularly in the case of actively managed funds with a higher expense ratio. This can help you determine if a higher returns justify a higher expense ratio.


💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

International IPO ETFs

What is an exchange-traded fund (ETF)? An ETF is a type of pooled investment that combines features of both mutual funds and stocks. Essentially, it’s a mutual fund that trades on an exchange like a stock.

This feature makes ETFs different from mutual funds. However, like mutual funds, ETFs have an expense ratio that reflects the annual cost of owning the fund over the course of a year. ETFs can follow an active or passive management strategy, with some funds using an index-based approach.

For some investors, international ETFs that concentrate holdings on companies that go public in foreign markets could make sense since they provide diversified exposure to newly listed non-U.S. companies in a single investment vehicle.

International IPO Mutual Funds

Mutual funds are also pooled investments, meaning multiple investors contribute funds used to buy underlying securities. Each investor in the fund assumes a share of the fund’s earnings (or losses), based on the number of shares they own.

The key difference between mutual funds and exchange-traded funds is how they’re bought and sold. Rather than trading on an exchange like stocks, traders settle mutual fund transactions once a day.

Mutual funds that invest solely in international IPOs may be harder to come than international IPO ETFs. But there are mutual funds that focus on international holdings.

How to Find International IPOs to Invest In

You may be able to purchase international IPOs or international IPO funds through your brokerage account.

To find potential investments, you might use an online resource like the Nasdaq IPO calendar, which lists all upcoming IPO dates. This can help you identify potential investment opportunities for upcoming international IPOs or global IPOs. Investing websites that report on the latest market trends and news offer another way to gain information about foreign companies that are pursuing international IPOs.

Recommended: How to Find Upcoming IPO Stocks Before Listing Day

Key Things to Consider When Investing in International IPOs

If you’re looking to international IPO funds for investment, consider the following:

•   What the fund holds (both the companies and the geographies)

•   The expense ratio, or costs associated with the fund

•   The fund manager’s strategy (or the index it follows)

•   If you’re investing in multiple international IPO funds, consider whether there’s any overlap in the holdings that might reduce your diversification

Evaluating international IPOs is similar to evaluating domestic IPOs. The company’s prospectus provides important information about the offering. Though keep in mind that a red herring prospectus may not disclose full details about the company’s financials or organizational structure.

It’s also important to consider risk factors unique to a foreign company that could affect its IPO outcome. A company located in a country that’s experiencing geopolitical turmoil or economic impact related to climate change, for instance, may have a higher risk profile than a company that isn’t facing those types of threats. So getting familiar with a company’s economics, politics and geography may be helpful before investing in an international IPO.

The Takeaway

IPOs allow investors to get in on the ground floor of an up-and-coming company. Whether you choose to invest in domestic IPOs or international IPOs, it’s important to understand, however, that they can also represent a riskier investment than an established public company.

International IPOs come with their own special set of concerns. While qualified U.S. investors may have access to IPO shares, it’s important to read the prospectus of international companies carefully, understand the product and the market you’re investing in, and vet the terms of any IPO international stock before you choose to buy it.

Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.

Invest with as little as $5 with a SoFi Active Investing account.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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