Investing Archives | Page 172 of 193

Dec

2022

Risks and Benefits of Margin Trading: Is It a Good Idea?

By Kenny Zhu | Growing Wealth, invest, Investing | Comments Off

Trading on margin offers traders the opportunity to amplify their returns using borrowed money. However, investors should understand that trading on margin operates like a double-edged sword; while it allows you to multiply your gains, it can also multiply your losses.

At its core, margin trading involves borrowing from your broker to increase your purchasing power. This allows you to buy well beyond the actual cash you have at your disposal. We’ll cover the mechanics of how this works, as well as the risks and benefits of undertaking such a strategy.

Understanding Margin Trading

Margin trading means borrowing funds from your broker and using those funds to buy securities. Any borrowed funds must be repaid, with interest, regardless of whether or not you earn a profit on your trade. If you’re wondering about the difference between leverage vs. margin, basically margin is a form of leverage.

When trading on margin, your broker will require you to post cash collateral to match a percentage of the funds you borrowed. This is known as the margin, and the exact amount is set by your broker, the type of security traded, and prevailing market conditions.

Risks and Benefits of Margin Trading

We spell out some of the most obvious risks and benefits to margin trading below.

Risks	Benefits
Amplified losses	Enhanced returns
High interest expense	Added liquidity
Risk of margin call	No set repayment schedule

Benefits of Margin Trading

Enhanced returns: The main benefit to margin trading is its ability to magnify your exposure to trades. This offers the potential for greater earnings thanks to the additional shares you accumulate (as well as the potential for loss).

Added liquidity: Assuming you remain inside of acceptable maintenance margin requirements, margin trading grants additional buying power to smaller cash balances, which can be useful if you don’t want to liquidate existing holdings.

No set repayment schedule: Unlike standard fixed loans, there’s no repayment schedule for repaying your margin loan. The interest accrues while your balance remains outstanding, and is only repaid once the position is closed.

Risks of Margin Trading

Amplified losses: Due to the larger position size afforded through margin trading, your losses will also be greater in the event the market moves against you.

High interest expense: Interest rates on margin loans can range from low single digits to as high as 11% or more, depending on your broker and the size of your margin balance. At best, this is a drag on investment returns; at worst, an additional cost you have to pay on a loss.

Risk of margin calls: If at any point, the value of your investments fall beneath a broker’s posted margin requirements, you will be required to deposit additional collateral to cover the shortfall. This is known as a margin call.

Failure to meet a margin call can result in a forced sale of your security, additional charges, and other penalties as dictated by your brokerage firm’s policies.

Increase your buying power with a margin loan from SoFi.

Borrow against your current investments at just 12%* and start margin trading.

*For full margin details, see terms.

Is Margin Trading Ever Not Risky?

Under no circumstances is margin trading ever considered free of risk. The core precept of all investing involves risk, and leveraged strategies like margin trading increase risk exposure.

Unlike cash accounts, which limit your losses to the value of your initial investment, margin accounts can result in losses that exceed the value of your initial deposit.

Is Margin Trading a Good Idea for You?

Margin trading isn’t for all investors, and its suitability depends on both the scenario as well as the experience and knowledge of each individual investor.

Trading on margin can be useful when you have a high conviction short-term trade idea and wish to overweight your exposure to that trade.

It can also provide the benefit of additional liquidity when much of your cash is tied up in existing investments that can’t be quickly unwound.

When considering margin trading, investors need to be willing and able to absorb any potential losses associated with this strategy. Make sure you fully understand the dynamics of each trade before opening a margin position.

Alternatives to Margin Trading

Given the high risk of loss associated with margin trading, it’s important for investors to explore other options. There are several alternatives to margin trading.

Keep in mind that under all scenarios cited, the magnified gain and loss dynamics still apply, and may or may not exceed the potential losses or gains a trader can obtain by trading on margin.

Penny Stocks

Penny stocks offer investors exposure to large swings in value, thanks to the low cost of each individual share. However, penny stocks are often cheap for a reason. Investors should conduct their own due diligence to understand the dynamics of any new holding they consider.

Crypto Investing

Cryptocurrencies are relative newcomers on the investment scene. The crypto space barely existed before Bitcoin launched in 2009.

Today, there are thousands of different crypto coins and tokens. These are high volatility investments that can change dramatically in value day to day.

The underlying technology is complex and can expose investors to the risk of total loss. Make sure you understand the risk reward dynamics of such a trade before buying any cryptocurrency.

Margin Trading With SoFi

If you’re looking to enhance your investment toolbox, SoFi offers margin loans through its trading app. Eligible members can obtain margin loans on their investments at a competitive annual interest rate.

Check out margin investing with SoFi to learn more.

FAQ

What are the downsides of trading on margin?

Trading on margin involves a number of possible downsides, including added interest costs, heightened portfolio volatility, and magnified losses that may exceed the value of your initial investment.

Do some people make a lot of money trading on margin?

Trading on margin can amplify your potential investment returns thanks to the added buying power it offers. However, this multiplier effect swings both ways and will amplify the size of your loss, should the market move against you.

Is margin trading a good long-term investment strategy?

Margin trading is a form of leveraged trading and therefore not recommended for long-term investors. Over extended periods of time, there’s a heightened risk that market volatility may force a margin call.

The added interest expense incurred by margin loans can act as a drag on your investment returns. This introduces an additional cost that you must cover, should your investment fail to outperform the interest expense incurred on your margin loan.

Photo credit: iStock/valentinrussanov

SoFi Invest®

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

Dec

2022

What Is the January Effect and Is It Good For Investors?

January Effect: What It Is and Is It Good for Investors?

By Brian O'Connell | Growing Wealth, invest, Investing | Comments Off

The January Effect is a term that some financial market analysts use to classify the first month as one of the best-performing months, stock-wise, during the year. Analysts and investors who believe in this phenomenon claim that stocks have large price increases in the first month of the year, primarily due to a decline in share prices in December. Theoretically, following the dip in December, investors pour into stocks and boost prices in January.

However, many analysts claim that the January Effect and other seasonal anomalies are nothing more than market myths, with little evidence to prove the phenomenon definitively. Nonetheless, it may be helpful for investors to understand the history and possible causes behind the January Effect.

What Is the January Effect?

As noted above, the January Effect is a phenomenon in which stocks supposedly perform well during the first month of the year. The theory is that many investors sell holdings and take gains from the previous year in December, which can push prices down. This dip supposedly creates buying opportunities in the first month of the new year as investors return from the holidays. This buying can drive prices up, creating a “January Effect.”

Believers of the January Effect say it typically occurs in the first week of trading after the New Year and can last for a few weeks. Additionally, the January Effect primarily affects small-cap stocks more than larger stocks because they are less liquid.

To take advantage of the January Effect, investors can either buy stocks in December that are expected to benefit from the January Effect or buy stocks in January when prices are expected to be higher due to the effect. Investors can also look for stocks with low prices in December, but have historically experienced a surge in January, and buy those stocks before the increase.

💡 Recommended: How To Know When to Buy, Sell, Or Hold a Stock

What Causes the January Effect?

Here are a few reasons why stocks may rise in the first month of the year.

Tax-Loss Harvesting

Stock prices supposedly decline in December, when many investors sell certain holdings to lock in gains or losses to take advantage of year-end tax strategies, like tax-loss harvesting.

With tax-loss harvesting, investors can lower their taxable income by writing off their annual losses, with the tax timetable ending on December 31. According to U.S. tax law, an investor only needs to pay capital gains taxes on their investments’ total realized gains (or losses).

For example, suppose an investor owned shares in three companies for the year and sold the stocks in December. The total value of the profit and loss winds up being taxed.

Company A: $20,000 profit
Company B: $10,000 profit
Company C: $15,000 loss

For tax purposes, the investor can tally up the total investment value of all three stocks in a portfolio — in this case, that figure is $15,000 ($20,000 + $10,000 – $15,000). Consequently, the investor would only have to pay capital gains taxes on $15,000 for the year rather than the $30,000 in profits.

If the investor still believes in Company C and only sold the stock to benefit from tax-loss harvesting, they can repurchase the stock 30 days after the sale to avoid the wash-sale rule. The wash-sale rule prevents investors from benefiting from selling a security at a loss and then buying a substantially identical security within the next 30 days.

💡 Recommended: Tax Loss Carryforward

A Clean Slate for Consumers

U.S. consumers, who have a robust say in how the American economy will perform, traditionally view January as a fresh start. Adding stocks to their portfolios or existing equity positions is a way consumers hit the New Year’s Day “reset” button. If retail investors buy stocks in the new year, it can result in a rally for stocks to start the year.

Moreover, many workers may receive bonus pay in December or January may use this windfall to buy stocks in the first month of the year, adding to the January Effect.

Portfolio Managers May Buy In January

Like consumers, January may give mutual fund portfolio managers a chance to start the year fresh and buy new stocks, bonds, and commodities. That puts managers in a position to get a head start on building a portfolio with a good yearly-performance figure, thus adding more investors to their funds.

Additionally, portfolio managers may have sold losing stocks in December as a way to clean up their end-of-year reports, a practice known as “window dressing.” With portfolio managers selling in December and buying in January, it could boost stock prices at the beginning of the year.

Is the January Effect Real?

The January Effect has been studied extensively, and there is evidence to suggest that it is somewhat real. Studies have found that small- and mid-cap stocks tend to outperform the market during January because they are less liquid.

But some analysts note that the effect has become less pronounced in recent years due to the rise of tax-advantaged investing accounts, like 401(k)s and individual retirement accounts (IRAs). Investors who use these accounts may not have a reason to sell in December to benefit from tax-loss harvesting. Therefore, while the January Effect may be somewhat real, its impact may be more muted than in the past.

January Effect and Efficient Markets

However, many investors claim that the January Effect is not real because it is at odds with the efficient markets hypothesis. An efficient market is where the market price of securities represents an unbiased estimate of the investment’s actual value.

Efficient market backers say that external factors — like the January Effect or any non-disciplined investment strategy — aren’t effective in portfolio management. Since all investors have access to the same information that a calendar-based anomaly may occur, it’s impossible for investors to time the stock market to take advantage of the effect. Efficient market theorists don’t believe that calendar-based market movements affect market outcomes.

The best strategy, according to efficient market backers, is to buy stocks based on the stock’s underlying value — and not based upon dates in the yearly calendar.

History of the January Effect

The phrase “January Effect” is primarily credited to Sydney Wachtel, an investment banker who coined the term in 1942. Wachtel observed that many small-cap stocks had significantly higher returns in January than the rest of the year, a trend he first noticed in 1925.

He attributed this to the “year-end tax-loss selling” that occurred in December, which caused small-cap stocks to become undervalued. Wachtel argued that investors had an opportunity to capitalize on this by buying small-cap stocks during the month of January.

However, it wasn’t until the 1970s that the notion of a stock rally in January earned mainstream acceptance, as analysts and academics began rolling out research papers on the topic.

The January Effect has been studied extensively since then, and many theories have been proposed as to why the phenomenon may occur. These include ideas discussed above, like tax-loss harvesting, investor psychology, window-dressing by portfolio managers, and liquidity effects in stocks. Despite these theories, the January Effect remains an unexplained phenomenon, and there is a debate about whether following the strategy is beneficial.

The Takeaway

Like other market anomalies and calendar effects, the January Effect is considered by some to be evidence against the efficient markets hypothesis. Nevertheless, there is evidence that the stock market does perform better in January, especially with small-cap stocks.

Whether one believes in the January Effect or not, it’s always a good idea for investors to use strategies that can best help them meet their long-term goals.

Ready to start investing or expanding your existing portfolio? A SoFi Invest® online brokerage account offers both active investing, which allows members to choose stocks and ETFs, as well as automated investing, where your money will be invested based on your goals and risk tolerance.

Take a step toward reaching your financial goals with SoFi Invest.

SoFi Invest®

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

Dec

2022

Investing Checklist: Things to Do Before the End of 2023

By Samuel Becker | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

There are numerous things that investors can and perhaps should do before the clock strikes midnight on New Year’s Eve, such as maxing out retirement or college savings account contributions, and harvesting tax losses.

Read on to find out what should probably be on your investing checklist for the end of the year, what to consider tackling before your tax return is due in April, and how some simple moves this December can help set you up nicely for 2023 and beyond.

End-of-Year vs Tax-Day Deadlines

Before diving into the year-end investing checklist, it’s important to remember that there are a couple of key distinctions when it comes to the calendar. Specifically, though the calendar year actually ends on December 31 of any given year, Tax Day is typically in the middle of April (April 15, usually). That’s the due date to file your federal tax return, unless you file for an extension.

As it relates to your investing checklist, this is important to take into account because some things, like maxing out your 401(k) contributions must be done before the end of the calendar year, while others (like maxing out your IRA contributions) can be done up until the Tax Day deadline.

In other words, some items on the following investing checklist will need to be crossed off before New Year’s Day, while others can wait until April.

7 Things to Do With Your Investments No Later Than Dec. 31

Here are seven things investors can or should consider doing before the calendar rolls around to 2023.

1. Max Out 401(k) Contributions

Perhaps the most beneficial thing investors can do for their long-term financial prospects is to max out their 401(k) contributions. A 401(k) is an employer-sponsored retirement account, where workers can contribute tax-deferred portions of their paychecks.

There are also Roth 401(k) accounts, which may be available to you, which allow you to preemptively pay taxes on the contributions, allowing for tax-free withdrawals in the future.

You can only contribute a certain amount of money per year into a 401(k) account, however. For 2023, that limit is $22,500, and will increase to $23,000 in 2024. For those over 50, you can contribute an additional $7,500 in 2023, for a total of $30,000 in 2023. In 2024, the contribution limit rises to $23,000, with a $7,500 catch-up provision if you’re 50 and up, for a total of $30,500.

So, if you are able to, it may be beneficial to contribute up to the $22,500 limit for 2023 before the year ends. After December 31, any contributions will count toward the 2024 tax year.

2. Harvest Tax Losses

Tax-loss harvesting is an advanced but popular strategy that allows investors to sell some investments at a loss, and then write off their losses against their gains to help lower their tax burden.

Note that investment losses realized during a specific calendar year must be applied to the gains from the same year, but losses can be applied in the future using a strategy called a tax-loss carryforward. With 2022 having been a particularly rough year in the markets, this may be a beneficial tactic for investors to add to their year-end To Do list. Again, though, tax-loss harvesting can be a fairly complicated process, and it may be best to consult with a professional

3. Consider 529 Plan Contributions

A 529 college savings plan is used to save for education expenses. There are a few different types, but the main thing that investors should focus on, as it relates to their year-end investing checklist, is to stash money into it before January as some states allow 529 contributions as tax deductions.

There is no federal contribution limit for 529 plans in 2022 — instead, the limit is set at the state level. Gift taxes, however, may apply, which is critical to consider.

4. Address Roll-Over Loose Ends

Another thing to check on is whether there are any loose ends to tie up in regard to any account roll-overs that you may have executed during the year.

For example, if you decided to roll over an old 401(k) into an IRA at some point during the year, you’ll want to make sure that the funds ended up with your new brokerage or retirement plan provider.

It may be easy to overlook, but sometimes checks get sent to the wrong place or other wires get crossed, and it can be a good idea to double-check everything is where it should be before the year ends.

5. Review Insurance Policies

Some employers require or encourage employees to opt into certain benefits programs every year, including insurance coverage. This may or may not apply to your specific situation, but it can be a good idea to check and make sure your insurance coverage is up to date — and that you’ve done things like named beneficiaries, and that all relevant contact information is also current.

6. Review Your Estate Plan

This is another item on your investing checklist that may not necessarily need to be done by the end of the year, but it’s a good idea to make a habit of it: Review your estate plan, or get one started!

Your estate plan includes several important documents that legally establish what happens to your money and assets in the event that you die. If you don’t have one, you should probably make it an item on your to-do list. If you do have one, you can use the end of the year as a time to check in and make sure that your heirs or beneficiaries are designated, that there are instructions about how you’d prefer your death or incapacitation to be handled, and more.

7. Donate Appreciated Stocks

Finally, you can and perhaps should consider donating stocks to charity by the end of the year. There are a couple of reasons to consider a stock donation: One, you won’t pay any capital gains taxes if the shares have appreciated, and second, you’ll be able to snag a tax deduction for the full market value of the shares at the time that you donate them. The tax deduction limit is for up to 30% of your adjustable gross income — a considerable amount.

Remember, though, that charitable donations must be completed by December 31 if you hope to deduct the donation for the current tax year.

3 Things for Investors to Do by Tax Day 2024

As mentioned, there are a few items on your investing checklist that can be completed by Tax Day, or in mid-April 2024. Here are the few outstanding items that you’ll have several more months to complete.

1. Max Out IRA Contributions

One of the important differences between 401(k)s and IRAs is the contribution deadline. While 401(k) contributions must be made before the end of the calendar year, investors can keep making contributions to their IRA accounts up until Tax Day 2024, within the contribution limits of course.

So, if you want to max out your IRA contributions for 2023, the limit is $6,500. But people over 50 can contribute an additional $1,000 — and you’ll have until April to contribute for 2023 and still be able to deduct contributions from your taxable income (assuming it’s a tax-deferred IRA, not a Roth IRA).

Further, the limit will increase to $7,000 in 2024, with the same $1,000 catch-up provision, and some taxpayers may be able to deduct their contributions, too, under certain conditions.

2. Max Out HSA Contributions

If you have a health savings account (HSA), you’ll want to make sure you’ve hit your contribution limits before Tax Day, too. The contribution limits for HSAs in 2023 are $3,850 for self-only coverage and $7,750 for family coverage, though depending on your age and a few other factors, there may be some additional things to consider. For 2024, the contribution limits are $4,150 for self-only coverage and $8,300 for family coverage. People over 55 can contribute an additional $1,000 in both 2023 and 2024.

3. Take Your RMD (if Applicable)

If you’re retired, you may need to take a required minimum distribution (RMD) from your retirement account by the beginning of April next year, if it’s your first RMD. But if you’ve taken an RMD before, you’ll need to do so before the end of 2023 — so, be sure to check to see what deadline applies to your specific situation.

This generally only applies to people who are in their 70s, but it may be worth discussing with a professional what the best course of action is, especially if you have multiple retirement accounts.

The Takeaway

Doing a year-end financial review can be extremely beneficial, and a checklist can help make sure you don’t miss any important steps for 2023 — and set you up for 2024. That investing checklist should probably include things like maxing out contributions to your retirement accounts, harvesting tax losses in order to manage your tax bill, and possibly even taking minimum required distributions. Everyone’s situation is different, so you’ll need to tailor your investing checklist accordingly.

Also, it’s important to keep in mind that you may have until Tax Day in April to get some of it done — though it may be good practice to knock everything out by the end of the year. If you’re only beginning to invest, keeping this list handy and reviewing it annually can help you establish healthy financial habits.

You can also start next year off strong by opening an investment account with SoFi Invest, and using SoFi’s secure, streamlined app to buy stocks, ETFs, and more.

Start investing today!

Photo credit: iStock/dusanpetkovic

SoFi Invest®

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

Nov

2022

What Is a Dogecoin Mining Pool?

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

A mining pool is a collection of miners who pool their resources and share the rewards of mining a proof-of-work (PoW) cryptocurrency like Dogecoin (DOGE).

Individual miners receive a portion of block rewards in proportion to how much hashing power they contribute.

Miners may earn less overall when mining in a pool vs. solo mining, in which an individual tries to solve for a block on their own, using significant time and computing power. But they receive rewards on a more consistent basis and can maintain a profitable operation, even with smaller amounts of computing power.

💡 Recommended: Is Crypto Mining Still Profitable in 2022?

How Does Dogecoin Mining Work?

In order to understand Dogecoin mining and Dogecoin pool mining, it’s important to remember the qualities that distinguish DOGE among the other types of crypto.

What Is DOGE?

Dogecoin (pronounced dohj-coin), or DOGE, is widely known as the first joke cryptocurrency. It was launched in 2013 as a way to poke fun at Bitcoin. Nonetheless, the currency captured people’s attention and a fair amount of investment.

Dogecoin is an altcoin similar to Bitcoin and Ethereum in that it runs on a blockchain network using a PoW system. But the number of coins that can be mined are unlimited (versus the 21 million-coin cap on Bitcoin).

Despite its place as one of the biggest coins by market cap, DOGE trades at one of the lowest prices: $0.084 cents, as of November 18, 2022.

Understanding Dogecoin Mining

Dogecoin mining works in much the same way that mining any other PoW cryptocurrency works. Dogecoin is based off of Litecoin, which forked from the original Bitcoin source code.

The main difference between Bitcoin (BTC) and Dogecoin (DOGE) or Litecoin (LTC) is that the latter two are altcoins that use a mining algorithm known as Scrypt. Bitcoin mining, by contrast, uses an algorithm called SHA-256. Scrypt allows for faster block confirmation times, which means faster transaction times.

Here’s a quick guide to crypto basics and how the mining process works.

• A blockchain is a type of distributed ledger technology (DLT).

• Blockchain networks are the highways on which cryptocurrencies travel.

• The computers that maintain a blockchain network are called “nodes.”

• Some nodes can add new blocks of transactions to the network and gain rewards. These nodes are called “miners.”

• Miners solve complex mathematical problems to process transactions and achieve consensus on the network, ensuring everyone agrees which transactions are valid.

💡 Recommended: How Does Bitcoin Mining Work?

Like gold mining, mining for crypto requires time and energy, whether you’re mining Bitcoin or an altcoin like Dogecoin or Litecoin. But unlike gold mining, computers do all the work in crypto mining. Individuals set up their mining rigs (powerful computer systems) and monitor the process. For some, mining cryptocurrency offers an opportunity to obtain cryptocurrency without buying it on an exchange.

How Do You Pool Mine Dogecoin (DOGE)?

To participate in a Dogecoin mining pool, you must have a crypto wallet that’s compatible with DOGE, and all the necessary hardware and software for mining.

Using a pool involves one extra step: telling the miners where to “point” their hashing power. This typically involves entering a single line of computer code into the mining software. The mining pool will provide the specific command, likely somewhere on its website or in the software itself.

Dogecoin Mining Equipment

Crypto mining requires sophisticated and powerful computers known as Application-Specific Integrated Circuits (ASICs). In the case of Dogecoin mining hardware, the ASIC must be specifically designed to run the Scrypt algorithm.

While there might be some pools that allow users to use SHA-256 ASICs, contribute that hashing power to the pool, and take rewards in DOGE, those interested in mining DOGE specifically should stick to Scrypt ASICs.

ASICs take so much electricity that even smaller miners usually require a special power supply to connect to an electrical outlet. They also generate considerable heat, and miners must keep them cool to prevent damage.

In addition to the ASICs and their power supplies, miners will need a laptop or desktop computer. Running the Dogecoin mining software can take a considerable amount of central processing unit (CPU) or graphic processing unit (GPU) power, so that computer probably won’t be able to do much else while the mining is happening.

💡 Recommended: What Is a Bitcoin Mining Pool? Should You Join One?

Pool Mining vs Solo Mining Dogecoin

Before you decide whether you want to pool mine or solo mine DOGE, you want to weigh the pros and cons.

The benefit of mining solo is that 100% of the block reward will go directly to you. But it could be weeks or months before you find a block because there is so much competition.

Most miners choose to join a mining pool. Pool miners receive rewards in proportion to the amount of hashing power they contribute. However, they also have to pay a small fee in exchange for using the pool.

Pros and Cons of Pool Mining	Pros and Cons of Solo Mining
Doesn’t require as much computing power.	Requires a lot of computing power & energy.
Earn rewards proportional to your hashing power.	100% of the mining reward goes to you.
Easier to join a pool than find a block to mine.	Can be hard to find a block to mine.
Must pay pool mining fees, which eat into profits.	Overall costs of solo mining are quite high, which can eat into profits.

Using a Pool to Mine Multiple Coins

Some mining pools mine multiple cryptocurrencies. This allows the pool to switch its mining activities should mining a different coin become more popular depending on the constantly changing variables of price and difficulty.

For example, some pools mine both Dogecoin and Litecoin since both rely on the same mining algorithm. If such a pool’s miners were focused on Dogecoin but the price of DOGE stagnates, it could become harder to mine DOGE due to difficulty increases, meaning reduced profits for miners absent a rise in DOGE. Then they could switch to Litecoin.

Dogecoin Cloud Mining

Mining via the cloud is another option, and you won’t need physical hardware or software. Cloud mining DOGE involves buying a contract for a certain amount of hashing power over a certain amount of time. Essentially, you’re renting computing power from someone else.

Be careful, there have been many cloud mining scams over the years.

How to Join a Dogecoin Mining Pool

Other than the above, most mining pools don’t have any special requirements for joining. They want to make it as easy as possible for new miners to contribute because they take a small fee from each block reward. The more miners in the pool, the more often the pool finds new blocks, and the more fees the pool will generate.

Mining pools often have instructions on their website that teach new miners how to join. It usually involves little more than entering a line of code into a mining program. Computers handle the rest.

Here is a rundown of the steps that an individual will take when joining a mining pool:

Step 1: Obtain the necessary hardware. As noted above, joining a mining pool may require less sophisticated equipment than solo mining.

Step 2: Select a Dogecoin mining pool to join (more in the next section).

Step 3: Download and install the software from the pool’s official site.

Step 4: Set up a DOGE crypto wallet and enter the address into the software (so the software knows where to send the new coins.

How to Find the Best Dogecoin Mining Pool

To choose the best Dogecoin mining pool for you, consider the following factors:

Fees and Costs

Because mining cryptocurrency comes with a significant investment of time and money, miners will want to choose a pool that earns them the greatest profit. That involves a pool with the lowest fees and most equitable reward structure. The biggest Dogecoin pool may or may not be the best, as there are other factors to consider.

For example, the Dogecoin mining pool power cost is also important to consider. Mining requires cheap electricity to be profitable, and for miners to make more money.

In addition, the mining pool itself will charge a fee, maybe 0.5% to 4% of the reward. You’ll want to compare the fees charged by different pools.

Reward Distribution

The reward for each block of transactions is 10,000 DOGE, and it’s split among the mining pool members, in proportion to the hashing power that member contributed to the mining pool. For that reason, computing power does matter when you join a mining pool.

The bigger the pool, the more consistent your rewards will be. So while you might be able to score 10,000 DOGE per month as a solo miner, you could earn the same amount in smaller chunks when you join a mining pool.

Hashing Power

You want a pool with a high combined hashrate. That’s more important than the overall size of the pool. But the size of the pool is also an indicator of how trustworthy/secure it is.

The more hashing power you contribute, the bigger your share of the rewards will be. Hashing power is a function of computing power, so it’s something to consider as you invest in your rig, or cloud mining.

Server Locations

In theory, it may be smarter to join a pool with servers on the same continent, in terms of hash rate needed. Proximity to servers may enhance your rewards.

Security

The security of the mining pool is obviously critical, and there are various aspects to consider. First, you want to ensure that the pool is transparent about its hashrate and payout structures. Does the pool have a real-time dashboard of activity that you can review?

Stability is also important. Does the pool have a lot of down time, which can impact your ability to mine as well as potential profits.

5 Popular Dogecoin Mining Pools

While there are many Dogecoin mining pools, some are more popular. Remember that the number of coins mined is correlated with the pool’s computing power. A larger pool may equal more computing power, but not necessarily. A smaller pool running more high-powered computers would outperform a larger pool with older networks.

1. Aikapool

One of the oldest mining pools, Aikapool doesn’t charge a fee and there are no withdrawal limits. The payout is PROP, or proportional to your hash rate.

2. Prohashing

The Prohashing pool is one of the largest pools and it’s notable for paying in DOGE, vs. converting rewards to BTC or LTC.

3. Multipool

Multipool allows you to mine for more than one type of crypto at once, sometimes called merge mining. So you can mine DOGE and LTC, for example. Multipool charges a fee of about 0.25%.

4. 1CoinPool

1CoinPool has a transparent fee structure, and pays according to the PPS (proportional pay per share, where you get a fixed amount per work submitted). 1CoinPoll operates two mining pools – Litecoin and Dogecoin. Also, there are no fees for withdrawals. This means that the miners are rewarded proportionally as per the hashing power. Furthermore, the coins get automatically added to the wallet.

5. LitecoinPool

Litecoin also has a transparent reward system (PPS), and doesn’t charge fees, including no withdrawal fees.

The Takeaway

Cryptocurrency mining is not an easy task, and won’t be profitable for most people most of the time. All the right variables must align for an individual to make money mining in most instances. Many take up mining as a hobby and as a way to build a small crypto portfolio while contributing to the livelihood of the network of a particular coin.

FAQ

Can Dogecoin still be mined in 2022?

Yes. Despite the ongoing volatility in the crypto markets, mining for many types of crypto continues. There are both solo Dogecoin miners and pool miners still active today.

How long does mining 1 Dogecoin take?

You can’t really mine 1 DOGE, because the rewards for mining a block is 10,000 DOGE. Given that it takes about a minute to mine a block of Dogecoin, depending on your equipment and the size of your mining pool, that’s roughly what it would take to obtain 1 DOGE.

How much Dogecoin could you mine in just 1 day?

Again, it depends on the number of blocks you have access to — either as a solo miner or as a pool miner — and how much hashing power you have. The supply of DOGE is unlimited, but you can only earn 10,000 DOGE per block of transactions that are confirmed.

Photo credit: iStock/Thirawatana Phaisalratana

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

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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.
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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.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount		Bonus Payout
Low	High	Bonus Payout
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

SOIN0822016

Nov

2022

Should You Invest With Friends?

By Anna Davies | Growing Wealth, invest, Investing | Comments Off

Investing with friends can seem like an intriguing concept. Instead of being the sole decision maker, you can share financial and knowledge-based resources to come up with a compelling investment strategy that serves your collective goals.

Investing with friends may also be a way to make a substantial impact in a cause you believe in, such as raising funds to invest in a friend’s startup or business venture.

And investing is something you’re likely already using as a way to connect. According to SoFi’s research, 70% of SoFi Invest members talk about investing with friends, family, or colleagues at least once a week. So it might make sense to some people to pool that passion and capital and begin investing together.

Of course, investing with friends also comes with some particular concerns you’ll want to consider in advance:

• Who controls the investment account and how are investment decisions made?

• What is the process if one person wants to remove their portion of the investment?

• How will any returns be distributed?

• Does the investment have a set length of time, or will it continue in perpetuity, or until all parties have decided to withdraw or buy out their investment?

Talking through scenarios like this can be helpful. It can also be helpful to come up with some sort of contract that outlines contingencies, so you know everyone is on the same page.

Pros and Cons of Investing With Friends

There are a number of upsides to investing with friends, but also some reasons to be cautious.

Pros	Cons
Friends can enjoy trust and similar POVs	Friends may rely on an honor system rather than proper procedures
May be able to reach compromises more easily	Strong emotions can lead people to make impulsive money choices
Friends add enthusiasm and support

Pros

When you invest with your friends, you enjoy a certain amount of trust and, often, similar values and perspectives on life. This can make it easier to explore new opportunities and set goals together.

Friends may have the ability to overcome disagreements and reach necessary compromises — a big plus when it comes to managing money.

Last, friends can cheer each other on, and pool enthusiasm as well as funds to generate momentum, and sustain commitment.

Cons

On the flip side, being friends sometimes leads people to rely on a “handshake” or honor system for doing business, rather than setting up proper protocols, paperwork, and protections.

This is understandable — you want to believe your friends have your back in all cases — but financial endeavors often function better with firewalls in place. That’s because, as much as you may like your friends, they’re only human. They may drop the ball, forget important details, or put their own interests ahead of yours.

In a similar vein, the camaraderie of good friends can generate a lot of enthusiasm for certain ideas or investment choices. But when it comes to money, as many behavioral finance studies have shown, emotions around money can lead people astray. It’s usually smarter to have a few guardrails in place, to guide any group.

What to Talk About Before You Invest With Friends

Before pooling resources, it may be wise to talk a little about how you each approach investing.

Maybe one friend is a Warren Buffett aficionado, while another is eager to invest in crypto.

Maybe one friend is eager to hit a specific financial goal while another is looking at investing with friends as a way to start an investment club to diversify their portfolio.

Before pooling resources, it’s a good idea to talk about how you each approach the market.

It can also be a good time to talk through all the what-ifs you can think of, including:

• What if our investments lose money?

• What if one of us needs the money for an emergency?

• What if more people want to invest in the future?

Finally, make sure your goals are aligned. Are you looking for specific investment opportunities?

Some friend groups get together for what is called impact investing, or socially conscious investing — investing in companies that have positive social, environmental, and environmental impact on the world.

Other friends may pool their money to gain access to investment opportunities that may have a minimum investment threshold, such as private investments and alternative investments like venture capital.

Once you’re all on the same page, you can then assess different methods of investing as a group of friends.

How Do You Start Investing With Friends?

There are a few different ways to start investing with friends.

Set Up a Brokerage Account

One way to invest with friends is to designate someone as the account holder, and have them open a brokerage account online with your group’s pooled resources. But that method may not allow for safeguards to protect your capital, or empower each individual investor with decision-making power.

Opening a brokerage account for your pooled funds may work for groups where there is one designated, trusted leader who manages the execution of trades, and where everyone involved agrees about the group investing style, whether active investing or some other strategies.

💡 Recommended: How to Open a Brokerage Account

Create an LLC

You may also choose to invest with friends as a show of faith for a mutual friend or family member’s startup or business venture. In this case, it can be helpful to create a limited liability company (LLC). And LLC can provide a structure for raising and investing cash, as well as making sure there is an agreement laid out as to potential returns on the investment and whether investors will have any power in the direction and decisions the company makes.

In creating an LLC, it may be helpful to seek legal advice to help create a contract so that everyone is on the same page and there is no confusion as to how money is used and what the return on investment will look like for investors.

Investing in Real Estate With Friends

Real estate can be expensive, so pooling your resources with friends may make sense.

There are a number of different ways to invest in real estate with friends. Among the most common:

• You might buy a long-term investment property, like a rental property.

• You could buy a short-term investment property, where you renovate and flip a home, for example.

• You could invest in a shared property where you and your friends live, or a property where one or more friends might live, with an agreement to sell it at a certain point, ideally for a profit.

However you approach your joint real estate venture, be sure to do research into the different types of business arrangements and real estate agreements that might suit your aims. Given how expensive and complicated real estate can be — even owning a shared home — and how many legalities could come into play, it’s best to get professional advice.

Investing in a Friend’s Business

While history abounds with successful businesses started by friends, think carefully before investing your own funds in a friend’s new venture. Ideally, you want to approach the question of whether to invest in your friend’s enterprise with your business hat on, so to say.

• Wait to be asked. Just because your friend is on fire about their new startup doesn’t mean they want you or your money involved. If they ask for your advice, rather than money, that could be a lower-stakes way to provide support.

• Kick the tires. If your friend does want you to invest, pretend you work on Wall Street. Read their business plan. Ask hard questions: how they’re raising capital, what kind of audience they’ve identified, and so on. Before deciding to put your own money into a project, you want to know it’s solid.

• Sign on the dotted line. Don’t attempt to do business with friends over a beer and a handshake. Lay out all the terms and expectations in a contract that protects all parties.

• Set emotional boundaries. You’re friends first, so have some rules in place that help you navigate when and where to talk business.

The Takeaway

For many people, there are tangible benefits to investing with friends: shared wisdom and experience, supporting each other’s financial goals, and in some cases the profits that may come from your joint venture. But there are disadvantages as well. It can be tempting to trust friends to do the right thing, when having a contract might provide more structure and clearcut consequences if an investment project goes awry.

There are many things to consider before investing with friends, and many different ways to go about it. In some cases, you might want to create an LLC with friends, to safeguard your own interests and make sure everyone is in agreement on the details of the arrangement.

If you’re not quite ready to invest your money directly with other people, and you want to gain more experience and wisdom on your own, you can start by actively trading stock with SoFi Invest.

SoFi’s investing platform has a feature available for Active Investing members that allows them to opt-in to share their investment portfolios, so you can see how your friends are doing and the market moves they’re making. Dollar amounts are hidden, but you can follow the holdings of friends who also have opted-into this feature, look at watchlists, and comment on trades.

You can also see you and your friends on a dynamic leaderboard with other members. This is a seamless way to see your friends’ investing behaviors, ask questions, and connect on investment decisions — while still keeping your finances separate.

Take a step toward reaching your financial goals with SoFi Invest.

FAQ

Is it a good idea to invest with a friend?

Investing with friends can offer some distinct advantages, including the power of combined finances, similar values, and basic trust. On the downside, though, friends might be tempted to do business with a handshake, rather than spelling out details and expectations clearly in an agreement or contracts that protects everyone involved.

Can a group of friends invest in stocks?

Friends can invest in stocks together in a few different ways. A set of friends can form an investment group or club, where they pool money and agree on a stock-picking strategy. It’s also possible for friends to invest in fractional shares.

How do I start an investing group with friends?

There are many different books and websites that can offer steps and guidelines for setting up an investment group with your friends.

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

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1. Max Out 401(k) Contributions

2. Harvest Tax Losses

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3. Consider 529 Plan Contributions

4. Address Roll-Over Loose Ends

5. Review Insurance Policies

6. Review Your Estate Plan

7. Donate Appreciated Stocks

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1. Max Out IRA Contributions

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3. Take Your RMD (if Applicable)

The Takeaway

What Is a Dogecoin Mining Pool?

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1. Aikapool

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3. Multipool

4. 1CoinPool

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The Takeaway

FAQ

Can Dogecoin still be mined in 2022?

How long does mining 1 Dogecoin take?

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Should You Invest With Friends?

Pros and Cons of Investing With Friends

Pros

Cons

What to Talk About Before You Invest With Friends

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