Investing Simple Logo
Menu
Get Started on Robinhood With 1 Free Stock!
Robinhood is offering new users 1 free stock worth between $3 and $225 when you open an account and fund it with any amount of money.
Written by Cari Scribner on October 4, 2021
Category: 
FTC Disclosure

SoFi Dividend Reinvestments: How Does It Work?

SoFi is an online investing platform offering members the opportunity to trade stocks and ETFs without commission fees, participate in upcoming Initial Public Offerings (IPOs) and buy fractional shares with as little as $5.

In this article, we are going to be reviewing SoFi and specifically SoFi dividend reinvestments. So, let's dive in!

What Is Dividend Reinvesting?

One of the ways investors can grow their wealth is by reinvesting their dividends.

A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders. Any amount not distributed is retained as earnings and reinvested in the business. Dividends are typically paid on a quarterly or annual basis.

Sure, you can take your dividends and consider them extra money falling from a tree, and spend it on entertainment, shopping or as part of a vacation fund.

Or, you can take the wiser route and reinvest your dividends in your portfolio.

How Does Dividend Reinvestment On SoFi Work?

SoFi offers its members a dividend reinvestment feature that can be enabled for each active invest account the member currently has.

Once an account is enabled, all eligible dividends in that account will be reinvested directly into the security or holding that paid the dividend.

The total amount of the dividend is determined by the market at the time the reinvestment is made, typically within three business days of the dividend pay date.

Dividend reinvestment is optional on the SoFi app. By default, an account is not enrolled in dividend reinvestment when opened. If a member decides to enable a dividend reinvestment account, they would need to login and visit the Manage section for the specific account they would like to enroll in.

Members can change their dividend reinvestment instructions at any time. When turning dividend reinvestment on or off, it may take up to 3 business days for changes to be in effect. Reinvestment instructions must be turned on or off 3 days prior to the record date for a particular dividend to be included or excluded for reinvestment.

What Investments Are Eligible For Dividend Reinvestment?

While not all SoFi dividends or securities are eligible for reinvestment, a good number of them are.

While the specific list of eligible securities is subject to change, the following general criteria applies when determining whether a holding is eligible for reinvestment:

  •  All marginable securities prices greater than $4.00
  •  Most U.S. Equities and U.S.-traded foreign equities
  •  All closed-end mutual funds not listed on the MSDI “H” Exchange, OTC, Pink Sheet, or Bulletin Board
  •  Unit Trusts with mandatory reinvestment clauses

What SoFi Account Types Are Eligible For Dividend Reinvestment?

All of your active invest brokerage and active IRA accounts at SoFi are eligible to participate in dividend reinvestment. For retirements accounts, this includes Traditional, Roth, Rollover, and SEP

Specific dividend payments such as one time dividends, special dividends, cash in lieu of dividends, or corporate actions may not be eligible for reinvestment.

Also keep in mind that SoFi automated investing accounts are not eligible for dividend reinvestment.

What Is An Automated Investing Account?

Automated investing uses computer algorithms to give financial guidance and portfolio management to investors. It is the polar opposite of an active investing portfolio in which you make decisions for yourself.

Using a SoFi automated investing platform has several perks, including affordability, convenience, and helping to avoid potential human errors. This type of investment strategy allows clients to use a “hands off” approach, which many people may prefer over the time-consuming research and management required for active trading.

However, if you are a seasoned investor with plenty of experience under your belt and confidence in your abilities to trade, you could do well with a SoFi active investing account.

How Will I Know When A Dividend Has Been Reinvested?

By visiting the “Activity” section of your account, you will be able to see if a dividend was reinvested. Dividends credited to an account will be labeled with the ticker symbol of the company paying the dividend followed by “Dividend.” Dividends that are subsequently reinvested will be displayed as an additional line item with the ticker symbol followed by “Dividend Reinvestment.”

Are Dividends and Dividend Reinvestments Taxable?

Dividends are generally taxable and are reported on Form 1099-DIV. Dividends are classified as qualified or non-qualified and may be taxed at different rates depending on your tax situation.

Dividend reinvestment itself is not taxable. However, when a reinvestment occurs, it triggers a purchase or buy transaction similar to buying a stock. Reinvesting dividends will alter an investor’s cost basis in a particular holding and those additional purchases may need to be reported to the IRS. Depending on how long the shares are held, the gain or loss will be considered long-term or short-term for tax reporting purposes.

SoFi Dividend Reinvestments: Conclusion

On SoFi, as with other online investing platforms, you will be paid dividends when the companies in which you own stock show a profit.

Of course, you have the option of cashing in your dividends as “found money,” but this does nothing to add to the value of your portfolio and, ultimately, build your personal wealth.

The other choice is to turn on reinvesting on SoFi to automatically direct that money into your portfolio.

SoFi places automated investing accounts  some restrictions on the accounts eligible for dividend reinvestment. Automated investing accounts are not eligible for dividend reinvesting. This type of account is passive investing on your part, with an algorithm making decisions for you rather than strategizing buying and selling based on your own research and accumulated knowledge.

Give some thought to the type of investing you want to do on SoFi – active or automated – and consider the fact that automatic dividend reinvestment will effectively erase the option of cashing out and needlessly spending dividends.

Best Free Stock Promotions

BrokeragePromotionLink
Robinhood Logo1 Free Stock (Up To $225)Download
Webull Logo2 Free Stocks (Up To $1,850)Download
Firstrade trading platform2 Free Stocks (Up To $400)Download
M1 Finance Robo AdvisorGet $30 When You Deposit $1,000Download
Acorns LogoFree $10 BonusDownload
SoFi Robo Advisor1 Free Stock Up To $1,000Download
sofi
Article written by Cari Scribner
Cari Scribner is a career journalist with 20 year’s experience writing for newspapers and magazines. Now a freelance writer, she is also a published fiction writer with more than 15 short stories in literary mags. She recently completed a novel that is on the desk for consideration at two publishing houses. She lives with her two small dogs, Miloh and Lucy, in Upstate NY.

Platform Reviews

Power Your Investing

Choosing the right product and service is essential for your investing. Here are some of the tools and services to help your portfolio grow.
Robinhood
Robinhood provides an easy-to-use free trading platform for beginner investors. Robinhood has $0 account minimums. Get a free stock when you open an account below.
Try Robinhood
M1 Finance
M1 Finance offers a free investing platform where users can build portfolios of stocks and ETFs. Users can also choose from a variety of pre-built portfolios offered for free.
Try M1 Finance
Fundrise
Passively invest in private real estate deals with as little as $10. Fundrise allows you to own residential and commercial real estate across the U.S. starting at a 1% annual fee.
Try Fundrise
© Copyright 2018 - 2020 Investing Simple LLC. All Rights Reserved. Investing Simple is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that investment markets have inherent risks, and past performance does not assure future results. Investing Simple has advertising relationships with some of the offers listed on this website. The information on Investing Simple could be different from what you find when visiting a third-party website. All products are presented without warranty. For more information, please read our full disclaimer.
Developed by Stallion Cognitive
magnifiermenucross-circlechevron-down-circle
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram
Copy link
Powered by Social Snap