Are margin rates low at SoFi Invest?
Margin trading - borrowing money from your broker to buy more assets than you could otherwise afford - is popular, but it's not available at all brokers, and margin interest rates can vary widely.
SoFi Invest offers margin trading, but its margin rates are high, so you should look elsewhere. Start with our picks for the best margin trading platforms, or read on for info on margin trading.
I've thoroughly tested SoFi Invest's services using real money. When it came to margin trading, high margin rates killed the deal for me:
- SoFi Invest's margin rates are high, which can erode your trading profits.
- Stock and ETF trading fees at SoFi Invest are low.
- Margin trading involves borrowing money from your broker to increase your exposure.
- Into margin trading? Skip SoFi Invest and check the best margin trading platforms.
Before we begin, let's see if SoFi Invest is available in your country:
SoFi Invest margin rates are high
So what are margin rates? Margin rates, sometimes called debit rates, refer to the interest rates charged by brokers when you borrow money to buy and sell stocks, ETFs (exchange-traded funds) or options on margin.
Each brokerage sets its own margin rates, but generally margin rates are closely tied to the benchmark interest rate of the currency in which you borrow. If your broker lends you USD, the margin rate will most often be the US interest rate plus a markup that the broker adds.
Brokers often have a tiered system for margin rates, depending on the amount you borrow: the more money the broker lends you, the lower the margin rate is. Some brokers also charge different margin rates for different types of trading accounts. Typically, a standard account will have higher rates than a premium account. The rates BrokerChooser quotes refer to standard accounts.
Most brokers calculate the margin rate on a daily basis, but the amount you owe them is charged to your account once a month. Brokers are required to disclose their margin rates; some do so citing an annual percentage rate while others will display it in swap points. Whichever it is, just keep in mind that margin rates can change rapidly without advance warning from your broker.
Broker | USD margin rate | USD margin rate class |
---|---|---|
SoFi Invest | 11.5% | High |
Alpaca Trading | 8.5% | Low |
Robinhood | 6.8% | Low |
Margin rates on short selling
Margin rates can also apply when you engage in short selling. Short selling means that you borrow shares from your broker and sell them with the expectation that the share price will decline. You will then repurchase the shares at a lower price, return them to the broker and pocket the price difference as your profit.
The margin rate for short selling is the interest rate charged by the broker on the borrowed funds used to facilitate the short sale. It is similar to the margin rates for simple stock, ETF or options trading.
Stock trading fees are low
Margin rates are the single most important item that influences your margin trading profits, but trading fees and other regular or one-off charges can also impact your overall trading costs.
SoFi Invest has low stock and ETF trading fees overall. See details of this and other fees charged by SoFi Invest and some close competitors in the table below. (Trading fees cited here refer to a $2,000 trade.)
Broker | US stock fee | UK stock fee |
---|---|---|
SoFi Invest | $0.0 | - |
Alpaca Trading | $0.0 | - |
Robinhood | $0.0 | - |
Margin trading in the US
Trading on margin means borrowing money from your broker to buy stocks, ETFs or options. But why would you do that? Basically, it increases your 'buying power', allowing you to open larger trading positions than you could otherwise afford with just the cash in your brokerage account. Just mind the risks, as any losses will also be magnified in the same way that gains are amplified.
At brokers regulated in the US, you need to open a margin account to be allowed to trade on margin. The mandatory minimum deposit for margin accounts is $2,000. Margin trading is governed by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and Regulation T, also known as Reg T, a rule by the US Federal Reserve Board.
Under Regulation T, the initial margin for most stocks is 50%. This means that you must put up at least 50% of the purchase price in cash, while the remaining 50% can be borrowed from the broker. Brokers can only require initial margins that are higher than this.
Reg T also stipulates that short selling requires a deposit equal to 150% of the value of the position at the time the short sale is executed. This 150% includes the full value of the short sale (100%), plus an additional margin requirement of 50%.
Check out this short video for a behind-the-scenes peek into how our experts personally test and evaluate brokers.
Further reading
- Diversifying your investments
- SoFi Invest stock conditions explained
- Stock trading at SoFi Invest: an expert guide and rating
- SoFi Invest penny stocks trading conditions explained
- ETF trading conditions at SoFi Invest explained
- SoFi Invest fractional shares trading conditions explained
- SoFi Invest cash interest rate
- SoFi Invest ESG investing
- SoFi Invest invest $100,000
- SoFi Invest IPO accessibility
- SoFi Invest Mexican stocks trading availability
- SoFi Invest US stock trading details
- SoFi Invest Australian stocks trading availability
- SoFi Invest Canadian stocks trading availability
- SoFi Invest Japanese stocks trading availability
- SoFi Invest French stocks trading availability
- SoFi Invest Italian stocks trading availability
- SoFi Invest Swiss stocks trading availability
- SoFi Invest Hong Kong stocks trading availability
- SoFi Invest Dutch stocks trading availability
- SoFi Invest Spanish stocks trading availability
- SoFi Invest Singapore stocks trading availability
- SoFi Invest Swedish stocks trading availability
- SoFi Invest Norwegian stocks trading availability
- Forex trading at SoFi Invest: Discover the key features and highlights
Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.