Investing Archives | Page 6 of 191

Dec

2024

Guide to the Sectors of the S&P 500 and Their Weights

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

The S&P sectors represent the different categories that the index uses to sort the companies it follows. There are 11 sectors that make up the S&P 500, and they include health care, technology, energy, real estate, and more.

Understanding how the S&P sectors work and break down further can help both institutional and retail investors manage risk through different economic cycles by allocating their portfolio across multiple sectors. For example, cyclical stocks and cyclical sectors tend to fare well when the economy booms. During a recession, however, defensive stocks may outperform them. However, it’s also possible for all 11 sectors to trend in the same direction.

Key Points

• The S&P 500 is divided into 11 sectors, including technology, healthcare, and financials, which help categorize the largest U.S. companies.

• Technology is the largest sector, reflecting significant growth and market influence from major companies like Apple and Microsoft.

• Utilities is the smallest sector, comprising just over 2% of the index, highlighting its smaller market impact compared to other areas.

• Sector weighting in the S&P 500 is dynamic, changing with the economic influence and size of constituent companies.

• Understanding these sectors aids investors in diversifying portfolios and strategizing investments based on economic conditions and market trends.

What Is the S&P 500

“S&P” refers to Standard & Poor, and the S&P 500 index tracks the movements of 500 large-cap U.S. companies. A number of mutual funds and exchange-traded funds (ETFs) use this index as a benchmark.

Many investors use the S&P 500 as a stand-in for the entire market when it comes to investing, particularly index investing. But again, the S&P 500 can be broken down into specific sectors in which companies of particular types are concentrated — allowing investors to get more granular, if they wish, with their investment strategies.

💡 Quick Tip: For investors who want a diversified portfolio without having to manage it themselves, automated investing could be a solution (although robo advisors typically have more limited options and higher costs). The algorithmic design helps minimize human errors, to keep your investments allocated correctly.

Examining the 11 Sectors of the S&P

The Global Industry Classification System (GICS) has 11 stock market sectors in its taxonomy. It further breaks down these 11 sectors into 24 industry groups, 74 industries, and 163 sub-industries. Here’s a look at the S&P Sector list, by size:

Technology
Health Care
Financials
Real Estate
Energy
Materials
Consumer Discretionary
Industrials
Utilities
Consumer Staples
Communications

1. Technology

Technology is the largest sector of the S&P 500. This sector includes companies involved in the development, manufacturing, or distribution of tech-related products and services. For example, companies in the technology sector may produce computer software programs or electronics hardware, or research and develop new technologies.

Tech stock investments are typically cyclical, in that they usually perform better during economic expansions. The technology sector includes a number of growth stocks, which are companies that reinvest most or all of their profits in expansion versus paying dividends. Examples of some popular tech stocks include:

• Facebook (META)

• Apple (AAPL)

• Microsoft (MSFT)

• Alphabet (GOOG)

• IBM (IBM)

2. Financials

The financials sector covers a variety of industries, including banking and investing. Banks, credit unions, mortgage companies, wealth management firms, credit card companies and insurance companies are all part of the financial sector.

Financial services companies are usually categorized as cyclical. For example, a credit card issuer’s profit margins may shrink during a recession if unemployment rises and people spend less or can not keep up with credit card payments. But this can be subjective, as mortgage companies may benefit during recessionary periods if lower interest rates spur home-buying activity.

Some of the biggest names in the financial sector include:

• Visa (V)

• JPMorgan Chase (JPM)

• Bank of America (BAC)

• PayPal Holdings (PYPL)

• Mastercard (MA)

3. Health Care

The next largest of the S&P sectors is health care. This sector includes pharmaceutical companies, companies that produce or distribute medical equipment, and supplies and companies that conduct health care-related research.

The health care sector also includes alternative health companies, including companies that use cannabis as a part of their medical research and product development.

Recommended: Cannabis Investing 101

More traditional examples of healthcare sector companies include:

• CVS (CVS)

• Johnson & Johnson (JNJ)

• UnitedHealth Group (UNH)

• Thermo Fisher Scientific (TMO)

• Regeneron (REGN)

Health care stocks are typically non-cyclical, as demand for these products and services usually doesn’t hinge on economic movements.

4. Consumer Discretionary

The consumer discretionary sector is a largely cyclical sector that includes companies in the hospitality and entertainment sectors, as well as retailers.

Examples of stocks that fit into the consumer discretionary sector are:

• Starbucks (SBUX)

• AMC (AMC)

• Best Buy (BBY)

• Home Depot (HD)

• Nike (NKE)

Generally, these companies represent things consumers may spend more money on in a thriving economy and cut back on during a downturn. That’s why they’re considered cyclical in nature.

5. Communications Services

This sector spans companies that provide communications services of some kind. That can include landline phone services, cellular phone services, or internet services. Communications also includes companies responsible for producing movies and television shows.

The communications sector can be hard to pin down in terms of whether it’s cyclical or defensive. In a down economy, for example, people may continue to spend money on phone and internet services but cut back on streaming services. So there’s an argument to be made that the communication sector is a little of both.

Companies that belong to this sector include:

• Comcast (CMCSA)

• AT&T (T)

• Dish Network (DISH)

• Discovery Communications (WBD)

• Activision Blizzard (ATVI)

6. Industrials

The industrial sector covers a broad range of industries, including those in the manufacturing and transportation sectors. For example:

• Honeywell (HON)

• 3M (MMM)

• Stanley Black & Decker (SWK)

• Delta Airlines (DAL)

• Boeing (BA)

Industrials are often considered to be cyclical stocks, again because of how they react to changes in supply and demand. The airline industry, for example, saw a steep decline in 2020 as air travel was curtailed due to the coronavirus pandemic.

7. Consumer Staples

Consumer staples stocks represent things consumers regularly spend money on. That includes groceries, household products and personal hygiene products. The consumer staples sector is also a defensive sector because even when the economy hits a rough spot, consumers will continue spending money on these things.

From an investment perspective, consumer staples stocks may not yield the same return profile as other sectors. But they may provide some stability in a portfolio when the market gets shaky.

Companies that are recognized as some of the top consumer staples stocks include:

• General Mills (GIS)

• Coca-Cola (KO)

• Procter & Gamble (PG)

• Conagra Brands (CAG)

• Costco Wholesale (COST)

8. Energy

The energy sector includes companies that participate in the production and/or distribution of energy. That includes the oil and gas industry as well as companies connected to the development or distribution of renewable energy sources.

Energy stock investments can be more sensitive to economic movements and supply-demand trends compared to other sectors.

Some of the biggest energy sector companies include:

• Exxon Mobil (XOM)

• Royal Dutch Shell (SHEL)

• Chevron (CVX)

• Conocophillips (COP)

• Halliburton (HAL)

9. Real Estate

This sector includes real estate investment trusts (REITs) as well as realtors, developers and property management companies. REITs invest in income-producing properties and may pay out as much as 90% of profits out to investors as dividends.

Investing in real estate can be a defensive move as this sector is largely uncorrelated with stocks. So if stock prices fall, for example, investors may not see a correlating drop in real estate investments as property generally tends to appreciate over time.

Examples of real estate companies in the S&P 500 include:

• Digital Realty (DLR)

• American Tower (AMT)

• Prologis (PLD)

• Simon Property Group (SPG)

• Boston Properties (BXP)

10. Materials

The materials sector includes companies connected to the sourcing, processing or distribution of raw materials. That includes things like lumber, concrete, glass, and other building materials.

Materials is one of the cyclical S&P sectors, as it can be driven largely by supply and demand. During a housing boom, for example, the materials sector may benefit from increased demand for lumber, plywood and other construction materials.

Material stocks in the S&P 500 include:

• Dupont (DD)

• Celanese (CE)

• Sherwin Williams (SHW)

• Air Products & Chemicals (APD)

• Eastman Chemical (EMN)

11. Utilities

Utilities represent one of the core defensive S&P sectors. This sector includes companies that provide gas, electricity, water, and other utilities to households, businesses, farms, and other entities.

Since these are essentials that people typically can’t do without, they’re generally less sensitive to major shifts in the economic cycle. They also often pay dividends to their investors.

Examples of utilities stocks include:

• AES (AES)

• UGI (UGI)

• CenterPoint Energy (CNP)

• Duke Energy (DUK)

• Dominion Energy (D)

Recommended: How to Invest in Utilities

How Are the Sectors of the S&P 500 Weighted?

Given that the S&P 500 is composed mostly of the largest companies, its weighting is relative to the size of those companies and their respective industries. As such, that’s why technology, health care, and financials are relatively large compared to other sectors.

It’s also important to understand that things change over time — in terms of company and industry size and influence on the overall economy. Accordingly, the index itself changes, and weighting of specific sectors and companies changes as well.

Which Is the Largest S&P 500 Sector?

As discussed, technology, or information and technology, is currently the largest sector in the S&P 500. That’s in large part due to the tech sector’s growth over the past couple of decades, and certain companies within the sector becoming larger with massive market caps — companies such as Apple, Microsoft, Alphabet, Meta, Netflix, and others.

Which Is the Smallest S&P 500 Sector?

As of March 2024, utilities is the smallest S&P 500 sector, comprising a little more than 2% of the overall index. But the materials and real estate sectors are not much bigger.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

What Can You Do As an Investor With This Information?

Investors can tap their knowledge of the S&P 500 sectors to help inform their investing strategy and plan. As discussed, while some sectors tend to be a bit more volatile, investors may look at specific and strategic allocations in other sectors to help “smooth” things out during times of volatility in the market.

Further, sector investing can help investors diversify their portfolios, or find additional opportunities to invest.

The Takeaway

Knowing what the S&P sectors are and which types of industries or sub-industries they represent can help investors achieve diversification through different types of investments. While some financial experts liken the sectors to a pie, with several individual slices, it may be more helpful to think of them as a buffet from which investors can pick and choose.

You can either purchase stocks within or across sectors, or look for funds that can provide that diversification for you. It’ll all depend on your overall financial plan and investment strategy. If you need help honing that in, it may be beneficial to speak with a financial professional.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, 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.

FAQ

What are the S&P 500 sector weights?

As of March 2024, information technology is the largest sector in the S&P 500, comprising nearly 30% of the overall index. It’s followed by financials at 13%, health care at 12.5%, and consumer discretionary at 10.6%.

What is the sector breakdown of the S&P 500?

The eleven sectors of the S&P 500 are information technology, financials, health care, consumer discretionary, communication services, industrials, consumer staples, energy, real estate, materials, and utilities.

What is the smallest sector of the S&P 500?

As of March 2024, utilities is the smallest sector of the S&P 500, comprising 2.1% of the overall index.

Photo credit: iStock/izusek

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.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
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.

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

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN0324001

Dec

2024

Bid and Ask Price: Definition, Example, How It Works

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

Bid and ask are commonly used investing terms, and they refer to the best potential price at which a security on the market could be bought or sold for at any given time. In other words, the best price that buyers and sellers would potentially be willing to buy (the “bid” price) or sell (the “ask” or offer price) the asset.

It’s important for traders to understand the bid vs. ask price of a security, as well as the difference between the two, which is known as the bid-ask spread. The market price is a historical price: the price of the last trade that occurred with the security. The bid and ask prices, on the other hand, show what buyers and sellers would be willing to trade the security for now.

Key Points

• The bid price is the highest price a buyer is willing to pay for a security, reflecting market demand.

• The ask price is the lowest price a seller is willing to accept, representing market supply.

• The bid-ask spread, the difference between bid and ask prices, serves as a transaction cost and indicates market liquidity.

• Narrow bid-ask spreads suggest high liquidity and trading volume, while wider spreads indicate lower liquidity.

• Investors use the bid-ask spread to assess market sentiment and risk, with narrower spreads indicating lower risk.

What Are Bid and Ask?

If you’re new to online investing or investing in stocks, you’re probably wondering about bid vs. ask prices. Bid and ask prices show the current market supply and demand for the security. The bid price represents demand for a security; the ask price represents supply.

When an asset has high liquidity — i.e. the market has a high trading volume not dominated by selling — the bid and ask prices will be fairly close. In other words the bid-ask spread, or the difference between the bid and ask prices, will be narrow in a highly liquid market. When there’s a greater gap between demand and supply, the spread will be wider.

That’s why the bid-ask spread is often considered a gauge of liquidity.

Bid Price

The bid price is the best potential price that retail investors would be willing to pay to buy a security.

So if a trader wants to sell a security, they would want to know how much they’d be able to sell it for. They can find out the best price they could get for the security by looking at the current bid price in the market, which would show the highest potential amount they could get for it.

Ask Price

Conversely, ask price is the lowest price investors are willing to sell a security for at any given time. If a trader wants to buy a security, they want to get the lowest possible price, so they look at the ask price to find out what that is.

Bid and Ask Price Examples

Let’s imagine that an investor wants to buy Stock X at the quoted price of $75, so they plan to buy 10 shares for $750. But they end up paying $752. That’s not an error, but rather because the ask price (the selling price) is $75.20.

The current price of $75 per share is the last traded price. But prices can change quickly, and in this case the ask price was 20 cents higher. The bid or buyer’s price is almost always lower than the ask price.

Investors can use limit orders to set specific parameters around the price at which they’re willing to buy or sell a security. This can give investors some control, so they’re not simply paying the current price, which may or may not be advantageous.

Evaluating the bid-ask spread can be part of an investor’s due diligence when trying to gauge rates of return for different securities.

What the Bid-Ask Spread Signals

How far apart the ask price and bid price are can give you a sense of how the market views a particular security’s worth.

If the bid price and ask price are fairly close together, that suggests that buyers and sellers are more or less in agreement on what a security is worth. On the other hand, if there’s a wider spread between the bid and ask price, that might signal that buyers and sellers don’t necessarily agree on a security’s value.

How Are Bid and Ask Prices Determined?

Essentially it’s the supply and demand of the market that sets the bid and ask prices. And many factors can play into supply vs. demand. Because of this, investors who are interested in active investing can use the difference in price between the bid and the ask of a security to gauge what the market thinks the security is worth.

Investors and market-makers can place buy or sell orders at a price they set. These orders will be fulfilled if someone is willing to sell or buy the security at that bid or ask price. Those order placements determine the bid and ask price.

What’s the Difference Between Bid and Ask Prices?

In any market, from stocks to real estate to lemonade stands, there is almost always a difference between what someone is willing to pay for an item versus what someone wants to sell it for.

A buyer may want to buy a house for $300,000, but the seller is selling it for $325,000. An investor may want to buy a stock for $100, but the sell or ask price is $105.

That difference in price is called the spread, and when the spread is narrow it’s a lot easier to close the sale. When the spread is wider, there is a bigger gap between what the buyer thinks an item is worth vs. what the seller thinks it’s worth.

What Does It Mean When Bid and Ask Are Close?

A narrow spread, i.e. when the bid and ask price are close, means traders will be able to buy and sell the security at roughly the same price. This generally means there is a high trading volume for the security, with a lot of people willing to buy and sell because of high demand.

If demand increases for the security, the bid and ask prices will move higher, and vice versa. If there is a surge in demand, but not enough supply, that might drive the bid price up. Conversely, if supply outpaces demand, the bid price of a security could fall In either case, the spread would likely get wider when the bid or the ask prices outweighs the other.

The Bid-Ask Spread

The bid-ask spread is the gap between the two prices: the bid or buyer’s price and the ask or offer price. There are different factors that can affect a stock’s spread, including:

• Liquidity. A measure of how easily a stock or security can be bought and sold or converted to cash. The more liquid an investment is, the closer the bid and ask price may be, since the market is in agreement about what the security is worth.

• Trading volume. This means how many shares of a stock or security are traded on a given day. As with liquidity, the more trading volume a security has, the closer together the bid and ask price are likely to be.

• Volatility. A way of gauging how rapidly a stock’s price moves up or down. When there are wider swings in a stock’s price, i.e. more volatility, the bid-ask price spread can also be wider as market makers attempt to profit from the price changes.

Who Benefits From the Bid-Ask Spread?

The difference in price between the bid and the ask is where brokers and market makers make their profit.

But traders can also benefit from the bid-ask spread, if they use limit orders to get the best possible price on a desired trade, as opposed to using market orders.

How the Bid-Ask Spread Is Used

When you understand how bid-ask spread works, you can use that to invest strategically and manage the potential for risk. This means different things whether you are planning to buy, sell, or hold a stock.

If you’re selling stocks, that means getting the best bid price; when you’re buying, it means paying the best ask price. Essentially, the goal is the same as with any other investing strategy: to buy low and sell high.

Bid-Ask Spread Impact on Trading Profits

Naturally, the bid-ask spread impacts trading profits, and in fact can act almost as a hidden cost.

For example, if an investor places a market order on a stock with a bid price of $90 and an ask price of $91, they’ll get the stock at $91 per share. If the price of the stock rises 5%, so the bid price is now $94.50 and the ask price is $95.55 and the bid-ask spread is $1.05.

If the investor decides to sell the shares they bought at $91 through a market order, they will receive $94.50 per share. So their profit is $3.50 per share, even though the stock price rose by $4.55. The $1.05 gap in profit reflects the $1.05 bid-ask spread on this stock.

Wide vs Narrow Bid-Ask Spread

What is the difference between wide and narrow bid-ask spreads, and what is the significance of each? Here’s a rundown.

Narrow Bid-Ask Spreads

The bid-ask spread, often just called the spread, is tighter when a security has more liquidity, i.e. there’s higher trading volume for that stock. When you think of big companies, industry leaders, constituents of different indexes like the Dow Jones or the S&P 500, those companies may have higher volume and narrower spreads.

Wider Bid-Ask Spreads

Conversely, smaller companies or those that aren’t in demand tend to have wider spreads, reflecting a lower level of market interest. These trades tend to be more expensive, as investors must contend with lower liquidity.

Impact of the Bid-Ask Spread

The narrower the bid-ask spread, the more favorable it is for traders. If an investor wants to buy 100 shares of Stock A at $60, but shares are being offered at $60.25, that 25 cent spread may not seem like much. It would add up to $25 (100 x 0.25). But if that trader wanted to buy 500 shares or more, the cost of the spread is about $125.

The Takeaway

Bid and ask prices help traders know exactly how much they may buy and sell securities for. The bid price is the highest price a buyer is willing to pay for a security. The ask price is the lowest price a seller is willing to accept. The difference between them is the bid-ask spread, or “spread.” The spread ends up being a transaction cost, as market makers pocket the cost of the spread.

Since the bid price and the ask price are essentially a function of supply and demand in the market, investors can consider the bid-ask spread as a gauge of risk. The narrower the spread, the more aligned buyers and sellers are on the value of a certain security, and thus there’s higher volume and more liquidity — and lower risk to the investor that the stock or security might lose value (although it could, as there are no guarantees).

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.

FAQ

Do I buy a stock at the bid or ask price?

You buy a stock at the ask price, that’s the lowest price the seller is willing to offer.

Is the last price the same as the market price?

The last price is the last traded price for a security, or the last price at which it closed. The market price is the best current price.

Is it better if your bid is higher than the asking price?

The bid price is typically lower than the seller’s price or ask price, so it would be unusual if the bid was higher than the ask. If a bid price is higher than the ask, a trade would occur, but it would put the buyer at risk of a potential loss.

Photo credit: iStock/eclipse_images

SoFi Invest®

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

SOIN-Q424-021

Dec

2024

Defensive Investment Strategy: Definition and Types

By Nina Semczuk | Growing Wealth, invest, Investing, Terminology | Comments Off

A defensive investment strategy is a way to manage a portfolio to try and minimize risk and protect capital. When the stock market is volatile, investors might wonder if their investment strategy makes sense for the specific conditions. After all, a volatile market may act as a drag on a portfolio, making it harder for an investor to meet their financial goals.

With all investing strategies, it helps to know the upsides and downsides before committing to a particular path. Defensive investing, like other investing strategies, has pros, cons, and timing factors to consider for when it might make the most sense to use this strategy.

Key Points

• A defensive investment strategy aims to minimize losses and preserve capital while generating modest returns, making it suitable for risk-averse investors or those nearing retirement.

• Common defensive investments include high-quality, short-maturity bonds, blue-chip stocks, dividend-paying stocks, and ETFs that mimic market indexes.

• Advantages of defensive investing include capital preservation, income generation through dividends or interest, and reduced volatility, making it a stable option for risk-averse investors.

• Disadvantages include limited growth potential, potential underperformance in rising markets, loss of purchasing power due to inflation, and fewer investment options.

• Defensive strategies are beneficial during market downturns and volatility, helping investors protect their capital and sleep better at night.

What Is a Defensive Investment Strategy?

A defensive investment strategy is a way investors try to minimize losses on their investments. The goal of a defensive investment strategy is to reduce the risk of losing principal while still generating modest returns. Investors who are risk-averse or nearing retirement and want to preserve the value of their assets may employ a defensive investment strategy.

The strategy is what the name suggests: defensive. Instead of an aggressive or offensive strategy, which targets high-growth assets and has the potential for high risk, a defensive strategy focuses on preserving a portfolio’s capital while still pursuing modest growth in the form of a dividend or interest payments.

Generally speaking, an investor with a defensive strategy portfolio would likely try to diversify their holdings across industries and regions, invest in blue-chip stocks, regularly rebalance their portfolio, buy short-maturity bonds, and place stop-loss orders.

What Are Defensive Investments?

Defensive investments are designed to provide stable, long-term returns with minimum volatility. These types of investments are often considered to be less risky, and therefore, suitable for investors looking to preserve their capital.

Typical investments in a defensive portfolio include:

• High-quality, short-maturity bonds (such as U.S. Treasury notes)

• Exchange-traded funds (ETFs) that mimic market indexes

• Large, high-quality established company stocks (i.e., blue-chip stocks)

• Dividend-paying stocks. These investments may provide lower returns than assets in a growth-oriented portfolio, but they can help investors preserve their wealth and generate a steady income stream.

Additionally, investors may hold cash and cash equivalents, like money market accounts and certificates of deposit (CDs), in a defensive portfolio. The advantage to these conservative investments is that they’re liquid assets, meaning that if an investor needs cash quickly, they’re easily convertible.

5 Examples of Defensive Investments and Strategies

There are several different types of defensive investments and strategies, each with its unique set of advantages and disadvantages. Some of the most common types of defensive investment strategies include:

Portfolio Diversification

Diversifying your portfolio spreads your investment across a wide range of asset classes, such as stocks, bonds, and cash. The idea behind portfolio diversification is that by investing in various assets – like defensive stocks, blue-chip stocks, and high-quality bonds – you can reduce the overall risk of your portfolio and protect yourself against market downturns.

Some defensive stock sectors include utilities, consumer staples, and healthcare.

Portfolio Rebalancing

Another tool for defensive investing is portfolio rebalancing. A portfolio’s asset allocation will change depending on how the assets perform. For example, if the stock market is particularly strong, stocks may become a higher percentage of a portfolio than desired.

Rebalancing is when an investor or portfolio manager adjusts investments to reflect the agreed-upon asset mix. For defensive online investing, it would likely be a smaller percentage of stocks and a higher percentage of bonds or other, more conservative investments.

Dollar Cost Averaging

A dollar cost averaging strategy is when you regularly invest a fixed amount of money in a particular asset, such as monthly or quarterly. This can help smooth out the market’s ups and downs and reduce your exposure to volatility.

Value Investing

Value investing is a strategy in which you focus on investing in companies with strong balance sheets and solid performance track records. Searching for value stocks can help protect your portfolio from the risks associated with more speculative investments.

Stop-Loss Orders

Defensive investing includes strategies such as using stop-loss orders to minimize losses. A stop-loss order is when an investor tells a stockbroker to sell a stock when its price falls to a predetermined level. Setting up stop-losses helps an investor shed falling stocks automatically to minimize losses.

Pros and Cons of Defensive Investing

A defensive investor may find the risk-averse nature of a conservative portfolio appealing, but it’s still critical to be aware of the pros and cons of this investing strategy.

thumb_up

Pros:

• Capital preservation

• Potential income generation

• Lower volatility

• Diversified portfolio

thumb_down

Cons:

• Limited growth

• Potential underperformance

• Loss of purchasing power

• Limited investments

Pros of Defensive Investing

Some of the advantages of using a defensive investing strategy include:

• Capital preservation: Defensive investing focuses on preserving capital by investing in low-risk assets less likely to suffer significant losses in a volatile market. This can help investors avoid substantial losses and protect their wealth.

• Potential income generation: Defensive investments often generate income through dividends or interest payments. This can provide investors with a regular stream of income they can use to meet their financial needs or to fund other investments.

• Reduced volatility: Defensive investments are generally less sensitive to market fluctuations, making them less likely to experience significant price swings. This can make them a more stable option for investors who are risk-averse or have a low tolerance for stock volatility.

• Diversification: A defensive investment strategy can help investors diversify their portfolios and reduce their overall risk. This can be especially beneficial for investors with concentrated holdings in a single asset or sector.

Cons of Defensive Investing

Some of the disadvantages of using a defensive investing strategy include the following:

• Limited growth potential: Because defensive investments are generally less risky, they may offer a lower potential for high returns than investments in stocks or other growth-oriented assets. This means that investors who pursue a defensive strategy may miss out on opportunities for significant gains.

• Underperformance in rising markets: Defensive investments may underperform in a bull market. Because these investments are designed to be less sensitive to market fluctuations, they may benefit less from increased market values. This can make them a less attractive option for investors who are looking to maximize their returns.

• Loss of purchasing power: The income generated by defensive investments may not keep pace with inflation, which can erode the purchasing power of investors’ capital over time. This can make it difficult for investors to maintain their standard of living or meet their long-term financial goals.

• Fewer investment options: Defensive investing typically involves investing in low-risk, income-generating assets such as government bonds and dividend-paying stocks. This limits the range of investment options available to investors and may not provide exposure to other asset classes or sectors that could offer higher returns.

When Is It Smart to Use a Defensive Investment Strategy?

When deciding how to invest, it’s important to know the options at hand, and when it’s best to employ a certain strategy.

For defensive investing, several factors come into play. If an investor is risk-averse, this type of conservative strategy may be recommended, as it typically offers less risk (but not no risk!).

There are a number of reasons why an investor might be risk-averse. For example, a retiree on a fixed income could fall into this category, or, someone who has limited funds and not much wiggle room for losing capital.

Another possibility is someone who is nearing retirement, and who wishes to preserve the gains they made with earlier investing. An investor who wants to conserve money, yet still aims to outpace inflation, might also choose this strategy.

Outside of individual preferences and situations, defensive investing could be helpful in times of market downturn and volatility. In turbulent environments, a defensive investment strategy can help investors sleep at night by keeping assets in less risky investments.

During times of economic stress, investors might opt for a defensive strategy to help them hang on to capital. While no investment is risk-free, shifting a portfolio to more conservative assets can help provide a cushion for volatility.

The Takeaway

A defensive investment strategy may be a useful way of mitigating risk and preserving the value of your investments. By understanding the different types of defensive strategies available, you can choose the approach that best suits your needs and goals.

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.

SoFi Invest®

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

SOIN-Q424-020

Dec

2024

What is a Retail Investor? Definition, Pros, and Cons

Retail Investors: Definition, Pros, and Cons

By Austin Kilham | Growing Wealth, invest, Investing | Comments Off

Generally, there are two primary types of investors: institutional and retail investors. Unless you work at an investment bank or big brokerage firm, you likely fall into the latter category. Institutional investors generally buy and sell securities on behalf of corporations, funds, organizations, or other high-net-worth individuals, whereas retail investors make investment decisions for themselves.

Here’s a closer look at what a retail investor is, and the pros and cons of investing on your own.

Key Points

• Retail investors are non-professional individuals who invest money in their own accounts through brokerage firms.

• Retail investors may manage their own accounts, or hire a professional to guide their investment decisions.

• Retail investors typically make smaller transactions compared to institutional investors.

• The SEC protects retail investors by enforcing securities laws and providing online education.

• Retail investor activity may impact individual stocks and the market at large.

What Is a Retail Investor?

A retail investor is a non-professional, individual investor who invests money in their own accounts, typically through traditional or online brokerage firms. They may invest as an active investor, allocating the money and making trades on their own, or they may hire a professional, such as a financial planner or advisor, to oversee the investment decision-making process.

Retail trading typically involves relatively small transactions, perhaps in the hundreds or thousands of dollars. Institutional investors, such as hedge funds, might move millions of dollars with every trade. The Securities and Exchange Commission (SEC) protects retail investors by enforcing securities laws and providing online education for investors.

How Retail Investing Works

Retail investors start by opening a brokerage account with a broker for traditional or online investing. Online brokers may offer automated accounts, also known as robo advisors, that can help investors who prefer a hands-off approach to building a financial portfolio.

Investors transfer money into their brokerage account and then buy and sell securities, including a wide range of stocks, bonds, exchange-traded funds (ETFs), and mutual funds. Alternatively, they can have a financial professional buy and sell securities on their behalf.

Retail investors may choose to invest in various securities depending on their investment goals and risk tolerance. For example, an investor looking for long-term growth may decide to invest in stocks, while an investor looking for steady income may choose to invest in bonds. Retail investors may also diversify their portfolios by investing in a mix of securities, such as stocks, bonds, and alternative assets.

Investors may have to pay investment commissions and fees to make trades, especially when working with a professional. Because retail investors tend to make smaller trades, these fees may be relatively high. That said, many online brokerages have reduced or eliminated commissions for individuals making trades for certain securities like stocks or ETFs. Investors can minimize the impact of commissions or fees by avoiding frequent trades and holding investments over the long term.

Overview of the U.S. Retail Investment Market

It is difficult to determine the exact size of the retail investment market in the U.S., as it is constantly changing and is influenced by various factors, such as economic and political events and market sentiment. Nonetheless, retail investors represent a significant portion of the American markets. By some estimates, there are millions and millions of retail investors, and American households own tens of trillions, or a majority of the U.S. equity market directly or through retirement accounts, mutual funds, and other investments.

The U.S. retail investment market has grown significantly in recent years, with many individual investors participating. This growth has been driven partly by the increasing availability of investment products and services and the increasing use of technology in the financial industry, making it easier for retail investors to access and trade securities.

What Impact Do Retail Investors Have on the Markets?

Retail investors can greatly impact individual stocks and the market at large. According to some experts, individuals are now having a greater impact on the market than they have for the last decade.

For example, retail investors took more interest in active trading during the pandemic in 2020, and flocked to online brokers, trading apps, and automated investing services. During this time, investors drove up the price of so-called “meme stocks” to thwart hedge funds attempting to make money shorting the stock. Such campaigns created volatility throughout the market.

Whether this enthusiasm will continue remains to be seen. But some believe the recent popularity points to a permanent structural change in which retail investors continue to play a significant role in market movements in the future.

Pros and Cons of Being a Retail Investor

Being a retail investor can give you access to many benefits, though there are a few drawbacks to be aware of as well. Here’s a look at some pros and cons of being a retail investor compared to an institutional investor.

Pros: Being a Retail Investor

Some of the potential pros of being a retail investor include:

• Control: As a retail investor, you can make your own investment decisions and choose the securities you invest in. This can be a significant advantage for those who want to control their investment portfolio and actively participate in the investment process.

• Diversification: Retail investors can diversify their portfolios by investing in various securities, such as stocks, bonds, and alternative investments. Diversification may help reduce risk by spreading investments across multiple assets rather than being heavily concentrated in just one or a few investments.

• Accessibility: The retail investment market is generally more accessible to individual investors than the institutional investment market, which is typically only open to large organizations, businesses, and high-net-worth individuals.

Cons: Being a Retail Investor

However, being a retail investor also has some potential drawbacks, including:

• Limited resources: Retail investors may have fewer resources and less access to information than larger institutional investors. This can make it more challenging for retail investors to compete with institutional investors in some cases.

• Higher costs: Retail investors may also face higher costs than institutional investors, such as higher trading fees and other expenses. These higher costs can eat into investment returns and make it more difficult for retail investors to achieve their financial goals.

• Lack of expertise: Some retail investors may have a different level of expertise or knowledge about investing than professional investors or financial advisors. This can make it more challenging for them to make informed investment decisions.

Retail vs Institutional Investors: What Are the Differences?

Retail and institutional investors are two types of investors who buy and sell securities for different purposes. Some key differences between retail and institutional investors include the following.

	Retail Investors	Institutional Investors
Size	Invest a relatively small amount of money	Generally have significantly more capital and resources at their disposal
Investment goals	May have various investment goals, such as saving for retirement, generating income, or growing their wealth over the long term	May have more specific investment goals, such as maximizing returns or minimizing risk for clients or a particular group of investors
Investment strategies	May focus on individual stocks and bonds, or use mutual funds and ETFs to diversify their portfolio	May use more complex investment strategies, like quant trading and various derivatives
Access to information	Relies on publicly available information or seeks guidance from financial advisors or other professionals	Generally have access to more information and research, such as proprietary data and contacts within companies and governments
Costs	Higher trading fees and other investment costs	Lower trading fees and other investment costs

The Takeaway

If you’re an individual saving for the future with investments, you’re a retail investor. While there are some disadvantages to being a retail investor compared to an institutional investor, there are also many benefits, and it’s a good way to build financial security over time.

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.

FAQ

Who is an individual retail investor?

A retail investor is an individual investor who buys and sells securities for their personal account rather than for a client, organization, or business. Retail investors may include individuals who invest in stocks, bonds, mutual funds, ETFs, and other securities through a brokerage account or other financial institution.

How do retail investors invest?

Retail investors invest in various securities and other financial instruments through a brokerage account or other financial institution. Some common ways retail investors invest include stocks, bonds, mutual funds, ETFs, and alternative investments.

How do I become a retail investor?

To become a retail investor, you’ll need to open a brokerage account with a financial institution, such as a bank or an online broker.

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.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
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.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN-Q424-026

Dec

2024

Guide to Taxes and Mutual Funds

By Samuel Becker | Growing Wealth, invest, Investing | Comments Off

Mutual fund investors pay taxes on the income or capital gains they see from their investments. But the specific tax treatment of mutual fund investments depends on several variables, which can breed confusion. For a long time, mutual funds have been a popular investment vehicle for millions of investors, largely because they offer an easy way to purchase no-fuss, diversified assets with relative ease. This out-of-the-box diversification and risk mitigation is something that individual stocks can’t match.

Read on to learn how taxes on mutual funds work, what investors should expect or anticipate when dealing with mutual funds and the IRS, and some strategies for tax-efficient investing.

Key Points

• Mutual fund investors must pay taxes on income or capital gains distributed by the fund, including dividends, interest, and realized capital gains.

• The tax treatment of mutual fund investments varies depending on the type of fund and the income or capital gains it generates.

• Shareholders may owe taxes on mutual fund holdings even without selling shares, due to realized gains from distributions.

• The amount of tax paid depends on the type of fund, income or capital gains, and the investor’s tax situation.

• Strategies to minimize taxes include investing in tax-efficient funds, using tax-deferred accounts, and employing a buy-and-hold strategy to avoid short-term capital gains taxes.

Quick Mutual Fund Overview

A mutual fund is a pooled investment vehicle that allows individuals to invest in a professionally managed portfolio of stocks, bonds, and other securities. Mutual funds are managed by professional portfolio managers who use the pooled capital to buy and sell securities according to the fund’s stated investment objective. When investors buy into a mutual fund while online investing, they’re purchasing a spectrum of assets all at once.

Mutual funds can be actively managed, where the portfolio manager actively buys and sells securities in the fund, or passively managed, where the fund tracks an index. Mutual funds are a popular way for individuals to diversify their portfolios and access professional investment management.

Recommended: How to Buy Mutual Funds Online

Do You Pay Taxes on Mutual Funds?

Mutual fund investors generally need to pay taxes on any income or capital gains the mutual fund distributes, including dividends, interest, and realized capital gains from the sale of securities within the fund.

It’s worth noting that mutual funds can be structured in different ways, and the tax treatment of mutual fund investments can vary depending on the specific type of mutual fund. For example, some mutual funds are classified as tax-exempt or tax-deferred, which means that they are not subject to certain taxes or that taxes on the income or gains from the fund are deferred until later.

When a mutual fund distributes income or capital gains to its investors, it must provide them with a Form 1099-DIV, which reports the distribution amount and any associated taxes. Investors are then responsible for reporting this income on their tax returns and paying any taxes that are due.

How Are Mutual Funds Taxed?

Mutual funds are taxed based on the income and capital gains they generate and distribute to their investors. This income and capital gains can come from various sources, such as dividends on stocks held by the fund, interest on bonds held by the fund, and profits from the sale of securities within the fund.

The tax treatment of mutual fund investments can vary depending on the type of fund and the type of income or capital gains it generates. Here are some general rules to keep in mind:

Paying Tax on “Realized Gains” from a Mutual Fund

It may come as a surprise that shareholders may owe taxes on their mutual fund holdings even if they don’t sell shares of the fund. That’s because shareholders still generate income from those holdings, which are often called “realized” gains.

Mutual funds are often actively managed, meaning that a portfolio manager regularly makes decisions about what the fund contains by buying and selling investments — a process that can net profits. Those profits, or gains, are then passed back to shareholders as distributions (or as dividends) or reinvested in the fund.

When shareholders are awarded distributions from funds, they see a “realized” gain from their investment. For that reason, shareholders may end up owing tax on investments that they have not sold or may have lost value over the year.

Paying Capital Gains on Mutual Funds

Most investors likely know that when they sell shares of a mutual fund, they’ll need to pay taxes on the earnings. Specifically, they’ll pay capital gains tax on the profit from selling an investment. The capital gains tax rate will vary depending on how long an investor holds the investment (short-term versus long-term).

Because funds contain investments that may be sold during the year, thereby netting capital gains, investors may be responsible for capital gains taxes on their mutual fund distributions. As each fund is different, so are the taxes associated with their distributions. So reading through the fund’s prospectus and any other available documentation can help investors figure out what, if anything, they owe.

How Much Tax Do You Pay on Mutual Funds?

The amount of tax you may need to pay on mutual fund investments depends on the type of fund, the type of income or capital gains the fund generates, and your individual tax situation.

Here are some general rules to keep in mind:

• Dividends: Dividends paid by mutual funds are taxed at different rates, depending on whether the payouts are ordinary or qualified dividends. Qualified dividends are taxed at a lower rate than ordinary dividends; they’re taxed at the long-term capital gains rate, which ranges from 0% to 20%. In contrast, ordinary dividends are taxed at an investor’s ordinary income tax rate.

• Interest: The tax on the interest income from mutual funds depends on whether the payout comes from tax-exempt bonds, federal debt, or regular fixed-income securities. Depending on the type of asset, the interest may be taxed at ordinary income tax rates or exempt from certain taxes.

• Capital gains: When a mutual fund sells securities for a profit, it may realize a capital gain, which is subject to tax. The tax rate on capital gains depends on how long the securities were held and your tax bracket. Short-term capital gains (on securities held for one year or less) are taxed at the same rate as ordinary income. In comparison, long-term capital gains (on securities held for more than one year) are generally taxed at the lower capital gains tax rate.

How to Minimize Taxes on Mutual Funds

Here are a handful of ways to potentially lower taxable income associated with mutual funds:

Know the Details Before You Invest

Do your homework! The holdings in each fund and how they’re managed will ultimately play a significant role in the tax liabilities associated with each fund. Before investing in a specific mutual fund, it’s worth digging through the prospectus and other documents to understand what to expect.

For example, an investor can typically find out ahead of time if a mutual fund makes capital gains distributions or how often a fund pays out dividends. Those types of income-generating events will need to be declared to the IRS come tax time.

Some investors may look for tax-efficient funds specifically designed to help mutual fund investors avoid taxes.

Use a Tax-deferred Account

Some brokerage or investment accounts — including retirement accounts like IRAs and 401(k) plans — are tax-deferred. That means they grow tax-free until the money they contain is withdrawn. In the short term, using these types of accounts to invest in mutual funds can help investors avoid any immediate tax liabilities that those mutual funds impose.

Recommended: Are Mutual Funds Good for Retirement?

Hang Onto Your Funds to Try and Avoid Short-term Capital Gains

If the goal is to minimize an investor’s tax liability, avoiding short-term capital gains tax is important. That’s because short-term capital gains taxes are steeper than the long-term variety. An easy way to ensure that an investor is rarely or never on the hook for those short-term rates is to subscribe to a buy-and-hold investment strategy.

This can be applied as an overall investing strategy in addition to one tailor-made for avoiding additional tax liabilities on mutual fund holdings.

Talk to a Financial Professional

Of course, not every investor has the same resources, including time, available to them. That’s why some investors may choose to consult a financial advisor specializing in these services. They usually charge a fee, but some may offer free consultations. For some investors, the cost savings associated with solid financial advice can outweigh the initial costs of securing that advice.

How Do You Report Mutual Funds on Your Taxes?

If you own mutual funds, you will generally need to report any income or capital gains you receive from the fund on your tax return.

Mutual funds are required to provide their investors with a Form 1099-DIV, which reports the amount of any dividends, interest, and capital gains distributions the fund paid out during the year. Make sure to keep this form for your records and use it to help complete your tax return.

You will then need to report any dividends, interest, and capital gains distributions you received from your mutual fund on your tax return, specifically on IRS Form 1040 or Schedule D (Form 1040).

The Takeaway

Mutual fund taxes are generally unavoidable, but with a little planning, you may be able to minimize the amount you get taxed. Employing some of the above strategies can help you minimize your mutual taxes. For example, those investing for long-term financial goals, like retirement, can use tax-deferred accounts as their primary investing vehicles. And by using those accounts to invest in mutual funds and other assets, they can help offset their short-term tax liabilities.

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.

FAQ

Do you pay taxes when you sell mutual funds?

Yes, you may be required to pay taxes when you sell mutual funds. The specific taxes you may be required to pay will depend on several factors, including the type of mutual funds you are selling, how long you have held the funds, and the type of gains you have earned from the sale.

Are mutual funds taxed twice?

Mutual funds are not taxed twice. However, some investors may mistakenly pay taxes twice on some distributions. For example, if a mutual fund reinvests dividends into the fund, an investor still needs to pay taxes on those dividends. Later, when the investor sells shares of the mutual fund for a gain, they’ll have to pay capital gains taxes on those earnings.

SoFi Invest®

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

SOIN-Q424-019

Guide to the Sectors of the S&P 500 and Their Weights

What Is the S&P 500

Examining the 11 Sectors of the S&P

1. Technology

2. Financials

3. Health Care

4. Consumer Discretionary

5. Communications Services

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.

6. Industrials

7. Consumer Staples

8. Energy

9. Real Estate

10. Materials

11. Utilities

How Are the Sectors of the S&P 500 Weighted?

Which Is the Largest S&P 500 Sector?

Which Is the Smallest S&P 500 Sector?

What Can You Do As an Investor With This Information?

The Takeaway

FAQ

What are the S&P 500 sector weights?

What is the sector breakdown of the S&P 500?

What is the smallest sector of the S&P 500?

Bid and Ask Price: Definition, Example, How It Works

What Are Bid and Ask?

Bid Price

Ask Price

Bid and Ask Price Examples

What the Bid-Ask Spread Signals

How Are Bid and Ask Prices Determined?

What’s the Difference Between Bid and Ask Prices?

What Does It Mean When Bid and Ask Are Close?

The Bid-Ask Spread

Who Benefits From the Bid-Ask Spread?

How the Bid-Ask Spread Is Used

Bid-Ask Spread Impact on Trading Profits

Wide vs Narrow Bid-Ask Spread

Narrow Bid-Ask Spreads

Wider Bid-Ask Spreads

Impact of the Bid-Ask Spread

The Takeaway

FAQ

Do I buy a stock at the bid or ask price?

Is the last price the same as the market price?

Is it better if your bid is higher than the asking price?

Defensive Investment Strategy: Definition and Types

What Is a Defensive Investment Strategy?

What Are Defensive Investments?

5 Examples of Defensive Investments and Strategies

Portfolio Diversification

Portfolio Rebalancing

Dollar Cost Averaging

Value Investing

Stop-Loss Orders

Pros and Cons of Defensive Investing

Pros:

Cons:

Pros of Defensive Investing

Cons of Defensive Investing

When Is It Smart to Use a Defensive Investment Strategy?

The Takeaway

Retail Investors: Definition, Pros, and Cons

What Is a Retail Investor?

How Retail Investing Works

Overview of the U.S. Retail Investment Market

What Impact Do Retail Investors Have on the Markets?

Pros and Cons of Being a Retail Investor

Pros: Being a Retail Investor

Cons: Being a Retail Investor

Retail vs Institutional Investors: What Are the Differences?

The Takeaway

FAQ

Who is an individual retail investor?

How do retail investors invest?

How do I become a retail investor?

Guide to Taxes and Mutual Funds

Quick Mutual Fund Overview

Do You Pay Taxes on Mutual Funds?

Student Loan
Refinancing

Personal
Loans

Online
Investments