Investing Archives

Jul

2025

Guide to Market-on-Open Orders

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

Table of Contents

What Is a Market-on-Open (MOO) Order?
How Market-on-Open Orders Work
Different Order Types
3 Reasons to Use a Market-On-Open Orders
Examples of MOO Trade
Risks of Market-on-Open Orders
Creating a Market-on-Open Order
FAQ

A market-on-open order (MOO) is an order to be executed at the day’s opening price. Investors typically have until two minutes before the stock market opens at 9:30am ET to submit a market-on-open order. MOO orders are used in the opening auction of a stock exchange.

While investors who subscribe to a more passive type of investing strategy may not incorporate MOO orders into their daily lives, they can be important to know about. You never know, after all, when you may want to place an order before trading commences.

Key Points

• Market-on-open orders execute at market opening, without price guarantees.

• MOOs have a higher likelihood of execution compared to limit orders.

• MOOs are useful for capturing immediate price movements.

• Risks involve volatility and potential liquidity issues.

• Limit-on-open orders may provide price protection.

What Is a Market-on-Open (MOO) Order?

Again, market-on-open orders are trades that are executed as soon as the stock market begins trading for the day. They may hit the order book before then, but do not actually go through the trading process until the market is opened. Note, too, that MOO orders are only to be executed when the market opens — they are the opposite of market-on-close, or MOC orders.

These orders are executed at the opening price during the trading day, or immediately (or soon after) the bell rings opening the market on a given day.

How Market-on-Open Orders Work

There may be different rules for different stock exchanges, but generally, the stock market operates between 9:30am ET and 4pm ET, Monday through Friday. Trades placed outside of the hours are often called after-hours trades, and those trades may be placed as market-on-open orders, which means they will execute as soon as the market opens for the next trading day.

An investor might place a market-on-open order if they anticipate big price changes occurring during the next trading day, among other reasons.

Different Order Types

To fully understand how an MOO order works, it may help to first understand both stock exchanges and the different ways that trades can be executed. The latter is generally referred to as an “order type.”

Stock exchanges are marketplaces where securities such as stocks and ETFs are bought and sold. In the U.S., there are more than a dozen stock exchanges registered with the Securities and Exchange Commission (SEC), including the New York Stock Exchange and Nasdaq Stock Exchange.

Next, market order types. Order types can be put into one of two broad categories: market orders and limit orders.

Market Order

A market order is an order to buy or sell at the best available price at the time. Generally, a market order focuses on speed and will be executed as close to immediately as possible.

But securities that trade on an exchange experience market fluctuations throughout the day, so the investor may end up with a price that is higher or lower than the last-quoted price. Therefore, a market-on-open order is a specific version of a market order.

Because it is a market order, it will happen as close to immediately as possible and at the open of the market. The order will be filled no matter the opening price of investment. There is no guarantee on the price level.

With each order type, the investor is providing specific information on how, and under what circumstances, they would like the order filled. In the world of order types, these are semi-customizable orders with modifications.

Limit Order

A limit order is an order to buy or sell a stock at a specific price. A limit order is triggered at the limit price or within $0.25 of it. At the next price, the buy or sell will be executed.

Therefore, limit orders can be made at a designated price, or very close to it. While limit orders do not guarantee execution, they may help ensure that an investor does not pay more than they can (or want to) afford for a particular security.

For example, an investor can indicate that they only want to buy a stock if it hits or drops below $50. If the stock’s price doesn’t reach $50, the order is not filled.

After-Hours Trading

An MOO order is not to be confused with after-hours trading and early-hours trading. Some brokerage firms are able to execute trades for investors during the hours immediately following the market closing or prior to the market’s open.

3 Reasons to Use a Market-On-Open Orders

There are several reasons to use a market-on-open order, including the following.

Trading Outside of Operating Hours

Stock exchanges aren’t always open. The New York Stock Exchange (NYSE) and the Nasdaq Stock Exchange are both open between 9:30 am and 4:00 pm EST.

Anticipating Changes in Value

Traders and investors may use a market-on-open order when they foresee a good buying or selling opportunity at the open of the market. For example, traders may expect price movement in a stock if significant news is released about a company after the market closes. They may want to cash out stocks, and do so using a market-on-open order.

The News Cycle

Good news, such as a company exceeding their earnings expectations, may lead to an increase in the price of that stock. Bad news, such as missing earnings estimates, may lead to a decline in the stock price. Some traders and investors may also watch the after-hours market and decide to place an MOO order in response to what they see.

It’s also important to know that stock exchanges tend to experience the most volume or trades at the open and right before the close. Even though the stock market is open from 9:30am to 4:00pm, many investors concentrate their trading at the beginning and near the end of the trading day in order to take advantage of all the liquidity, or ease of trading.

Examples of MOO Trade

Let’s look at some hypothetical examples of why an MOO order might be useful:

Example 1

Say that news breaks late in the evening regarding a large scandal within a company. The company’s stock has been trading lower in the after-hours market. An investor could look at this scenario and believe that the stock is going to continue to fall throughout the next trading day and into the foreseeable future. They enter an MOO order to sell their holding as soon as the market is open for trading.

Example 2

Or maybe a company quarterly earnings at 7am on a trading day. The report is positive and the investor believes the stock will rise rapidly once the market opens. With an MOO order, the investor can buy shares at whatever the price may be at the open.

Example 3

Though this won’t apply to the average individual investor, MOO orders may also be used by the brokerage firms to fix errors from the previous trading day. A MOO order may be used to rectify the error as early as possible on the following day.

Risks of Market-on-Open Orders

It is important to understand that if a MOO order is entered, the investor receives the opening price of the stock, which may be different from the price at the previous close.

Volatility at the Open

Considering the unpredictable and inherent volatility of the stock market, the price could be a little bit different — or it could be very different. Investors that use MOO orders to try and time the market may be sorely disappointed in their own ability to do so, but only because timing the market is exceedingly difficult.

Most investors will likely want to avoid trying to weave in and out of the market in the short-term and stick with a long-term plan. Some investors may use MOO orders with the intention of taking advantage of price swings, but the variability of the market could trip up a new investor.

Because the order could be filled at a price that is significantly different than anticipated, this may create the problem of not having enough cash available to cover a trade.

Using Limit-on-Open Orders

An alternative option is to use a limit-on-open order, which is like an MOO order, but it will only be filled at a predetermined price. Limit-on-market orders ensure that a transaction only goes through at a certain price point or “better.” As discussed, there are other types of limit orders out there, too, for given situations. For instance, there may be a context in which it’s best to use a stop loss order, rather than a limit-on-open or similar type of order.

The downside of doing a limit-on-market order is that there is a chance that the order doesn’t get filled.

Liquidity Issues

With an MOO order, there could also be a problem of limited liquidity. Liquidity describes the degree to which a security, like a stock or an ETF, can be quickly bought or sold.

As mentioned, there tends to be greater liquidity at the beginning of the day and at the end, and investors will generally not have a problem trading the stocks of large companies, because they have many active investors and are very liquid.

But smaller companies can be less liquid assets, making them slightly trickier to trade. In the event that there is not enough liquidity for a trade, the order may not be filled, or may be filled at a price that is very different than anticipated.

💡 Quick Tip: Newbie investors may be tempted to buy into the market based on recent news headlines or other types of hype. That’s rarely a good idea. Making good choices shouldn’t stem from strong emotions, but a solid investment strategy.

Creating a Market-on-Open Order

Creating a market-on-open order is fairly simple, but may vary from trading platform to trading platform. Generally speaking, though, a trader or investor would select an option to execute a MOO when filling out the details of a trade they wish to make.

For instance, if you wanted to sell 5 shares of Company A, you’d dictate the quantity of stock you’re trying to sell, and then choose an order type — at this point, you’d select a market-on-open order from what is likely a list of choices. Again, the specifics will depend on the individual platform you’re using, but this is generally how a MOO is created.

The Takeaway

Market-on-open orders are submitted by investors when they want their order executed at the opening price and be part of the morning auction. An investor may use this order if they want to capture a stock’s price move up or down as soon as the trading day starts.

However, MOO orders don’t guarantee any price levels, so it may be risky for an investor if shares don’t move in the direction they were expecting. Unlike limit orders though, they are more likely to get executed.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What is a market-on-open order?

Market-on-open (MOO) orders are stock trading orders made outside of normal market hours and fulfilled when the markets open. Trades execute as soon as the market opens.

What is a market-on-open limit on open?

A limit-on-open order, or LOO, is a specific form of limit order that executes a trade to either buy or sell securities when the market opens, given certain conditions are met. Usually, those conditions concern a security’s value.

What is the difference between market-on-close and market-on-open?

As the name implies, market-on-close orders are executed when the market closes at 4 pm ET, Monday through Friday (excluding holidays). Conversely, market-on-open orders are executed when the market opens at 9:30am ET, Monday through Friday.

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

SOIN-Q225-150

Jul

2025

What Is a Divestiture?

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

Table of Contents

What Are Reasons a Company Would Divest Itself?
What Happens in a Divestiture?
What Are The Different Types of Divestitures?
What Causes a Company to Divest?
Divestiture Strategy Example
FAQ

A divestiture, also known as a divestment, involves the liquidation of a company’s assets, such as building or intellectual property, or a part of its business, such as a subsidiary. This can occur through several different means, including bankruptcy, exchange, sale, or foreclosure.

Divestitures can be partial or total, meaning some or all of the company could be spun off or otherwise divested, depending on the reason for the company getting rid of its assets. Corporate mergers and acquisitions are a common example of one type of divestiture.

Key Points

• Divestiture involves selling or liquidating business parts to improve financial health and focus on more profitable areas.

Understanding why a company may divest itself of certain assets or facets of its business can help inform investing decisions.

• Reasons for divestiture include eliminating underperformance, freeing capital, and adapting to market changes.

• The process includes monitoring the portfolio, identifying a buyer, executing the divestiture, and managing financials.

• Companies may use the proceeds of a divestiture for reinvestment.

• Divestiture can positively impact shareholders by reallocating resources, but may initially cause stock price drops.

What Are Reasons a Company Would Divest Itself?

Often a divestiture reflects a decision by management that one part of the business no longer helps it meet its operational goals. A divestiture can be an intelligent financial decision for a business in certain situations.

If one aspect of a business (e.g., a product line or a subsidiary) isn’t working, has become unprofitable, or is likely to soon consume more capital than it can create, then instead of letting that be a continued drain on resources, a company can divest.

This not only does away with the troublesome aspect of the company, but also frees up some money the company can put toward more productive endeavors, such as new research and development, marketing, or new product lines.

There are many other potential reasons for a company to divest itself of a particular aspect of its business as well. The growth of a rival may prove overwhelming and insurmountable, in which case divesting might make more sense than continuing to compete.

A company may choose to undergo a divestment of some sort, such as closing some store locations, in order to avoid bankruptcy, to take advantage of new opportunities, or because new market developments might make it difficult for part of the company to survive.

Companies also sometimes must divest some of their business because of a court order aimed at breaking up monopolies. This can happen when a court determines that a company has completely cornered the marketplace for its goods or services, preventing fair competition.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

What Happens in a Divestiture?

When a divestiture involves the sale of part or all of a company, the process has four parts. The first two parts involve planning for the actual divestment transaction itself. Once management decides which part of the company to divest and who will be buying it, the divestment can begin.

1. Monitoring the Portfolio

When pursuing an active divestiture strategy, the company’s management team will review each business unit and try to evaluate its importance to the company’s overall business strategy. They’ll want to understand the performance of each part of the business, which part needs improvement, and if it might make sense to eliminate one part.

2. Identifying a Buyer

Once the business identifies some or all of the company as a potential divestment target, the team moves on to the next problem that logically follows: Who will buy it?

The goal is to find a buyer that will pay enough for the business to cover the estimated opportunity cost of not selling the business unit in question. If the buyer does not have the liquidity to make the purchase with cash, they might offer an equity deal or borrow money to cover the cost.

3. Executing the Divestiture

The divestiture involves many aspects of the business, including a change of management, company valuation, legal ownership, and deciding which employees will remain with the company and which ones will have to leave.

4. Managing the Financials

Once the sale closes, attention turns to managing the transition. The transaction appears on the company’s profit-and-loss statement. If the amount that the company receives for the asset it sells is higher than the book value, that difference appears as a gain. If it’s less the company will record it as a loss.

The company will typically share the net impact of the divestiture in its earnings report, following the transaction.

What Are The Different Types of Divestitures?

There are several different ways companies can define divest for themselves. Knowing the type of and reason for a divestiture can help investors determine whether the trajectory of a company is in line with their goals. A few types of divesting options include:

• An equity carve-out, when a company can choose to sell a portion of its subsidiaries through initial public offerings (IPOs) but still retain full control of them.

• A split-up demerger, when a company splits in two, and the original parent company ceases to be.

• A partial sell-off, where a business sells one of its subsidiaries to another company. The funds from the sale then go toward newer, more productive activities.

• A spin-off demerger, in which a company’s division becomes a separate business entity.

What Causes a Company to Divest?

A divestiture strategy can be part of an overall retrenchment strategy, when a company tries to reinvent itself by slimming down its activities and streamline its capital expenditures. When that happens, the company will divest those parts of the business that are not profitable, consuming too much time or energy, or no longer fit into the company’s big-picture goals.

Factors that could influence a company to adopt a divestiture strategy can be lumped into two broad groups:

External Developments

External developments include things outside the company, such as changing customer behavior, new competition, government policies and regulations, or the emergence of new disruptive technologies.

Internal Developments

Internal developments include situations arising from within the company, such as management problems, strategic errors, production inefficiencies, poor customer service, etc.

Divestiture Strategy Example

Imagine a fictitious company called ABC was the parent of a pharmaceutical company, a cosmetic company, and a clothing company. After some time and analysis, ABC’s management determines that the company’s financials have begun deteriorating and they need to make a change in the business.

Following the four-step process above, they begin by finding the weakest points of business. Eventually, they decide that the pharmaceutical branch of the company is under-performing and would also be the easiest for the company to divest. It makes more sense to stick to clothing and cosmetics.

After identifying a buyer (perhaps a larger pharmaceutical company or a promising startup looking to expand), the divestment transaction occurs. The employees who work in the pharmaceutical branch either lose their jobs, or they get roles working for the new owner of that part of the business. The cash infusion that ABC gets as a result of the sale of its pharmaceutical branch will go toward new marketing efforts and creating new product lines.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

The Takeaway

Divesting is essentially the opposite of investing. It involves a company selling off parts of its business. A divestiture can have some positive outcomes on the value of a company, and there are several business reasons that a company would choose to divest. Depending on the circumstances, this process could theoretically be either a positive or a negative for shareholders.

Investors could see news of a divestment as a sign that a company is struggling, leading them to sell the stock. While this initial reaction could be one likely outcome, the company could eventually wind up doing even better than before if it manages itself better as a leaner company. In either case, the divestiture is one factor that investors can use in their analysis of that company’s stock.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What does it mean when a company makes a divestiture?

Divestitures typically involve a company selling or otherwise liquidating portions or elements of their business to focus their efforts on more profitable areas.

What are the different types of divestitures?

There are several different types of divestitures, and they can include equity carve-outs, split-up demergers, partial sell-offs, or spin-offs.

What could cause a company to make a divestment?

Companies might make divestments due to external or internal developments (which can vary greatly in type and scope). Reasons for divestiture may include the need to focus on the more profitable facets of the business, shift following the emergence of new competitors, or avoid bankruptcy.

Photo credit: iStock/NeoLeo

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SOIN-Q225-144

Jul

2025

How to Gift a Stock

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

Table of Contents

The Benefits of Gifting Stocks
8 Ways to Gift Stocks
Things to Consider When Giving a Stock Gift
Tax Implications of Gifting Stocks
How to Choose the Right Stock to Gift
Selecting Blue-Chip vs. Growth Stocks
FAQ

Gifting stock can be a simple process, as long as your intended recipient has a brokerage account, too. You’ll just need their basic personal and account information. One reason to consider transferring shares of a stock, instead of selling them and gifting the proceeds, is that you’ll typically avoid realizing the capital gains and owing related taxes.

Key Points

• There are several ways to gift stocks, such as setting up a custodial account for kids, setting up a DRIP, virtual transfers, and physically handing over stock certificates.

• Gifting stocks can benefit the giver as well as the receiver, as the giver can take a tax deduction while avoiding capital gains tax.

• The annual gift tax exclusion for 2025 is $19,000 per year, per person.

• Gifting stocks to charities can benefit both the giver and the charity as the giver doesn’t have to pay capital gains taxes and the charity is tax-exempt.

• Gifts can also be made via investing apps and stock gift cards.

The Benefits of Gifting Stocks

Besides being a nice gift (who doesn’t like to give, or receive, a gift?), there are some potential financial benefits to gifting stocks.

There are tax benefits, for one, which allow the donor to deduct the fair market value of the stock on their tax return. You can also potentially avoid capital gains tax, as the receiver inherits a stock’s original cost basis from the donor.

There can be strategic benefits, too. If an investor is looking to rebalance their portfolio or make some reallocations, gifting stock may be an option to consider. And, again, it can allow them to do it while giving a gift, and potentially reducing their tax liabilities.

8 Ways to Gift Stocks

There are several ways that stocks can be gifted, including through custodial accounts, and even gift cards.

Set Up a Custodial Account for Kids
Set up a DRiP
Gifting to a Spouse
Virtual Transfers and Stock Certificates
Gifting Stock to Charity
Passing Down Wealth
Gifting Through a Roth IRA
Gifting to Friends Through a Brokerage Account

1. Set Up a Custodial Account for Kids

Parents can set up a custodial brokerage account for their kids and transfer stocks, mutual funds, and other assets into it. They can also buy assets directly for the account. When the child reaches a certain age they take ownership of it.

This can be a great way to get kids interested in their finances and educate them about investing or particular industries. Teaching kids about short and long term investments by giving them a stock that will grow over time is a great learning opportunity. However, keep in mind that there is a so-called “kiddie tax” imposed by the IRS if a child’s interest and dividend income is more than $2,600.

2. Set up a DRiP

Dividend Reinvestment Plans, or DRiPs, are another option for gifting stocks. These are plans that automatically reinvest dividends from stocks, which allows the stock to grow with compound interest.

3. Gifting to a Spouse

When gifting stocks to a spouse, there are generally no tax implications as long as both people are U.S. citizens. A spouse can either gift a present interest or a future interest in shares, meaning the recipient spouse gets the shares immediately or at a specified date in the future.

According to the IRS, If the recipient spouse is not a U.S. citizen, there is an annual gift tax exclusion of $190,000. Any amount above that would be taxed.

4. Virtual Transfers and Stock Certificates

Anyone can transfer shares of stock to someone else, if the receiver has a brokerage account. This type of gifting can be done with basic personal and account information. One can either transfer shares they already own, or buy them in their account and then transfer them. Some brokers also have the option to give stocks periodically.

Individuals can also buy a stock certificate and gift that to the recipient, but this is expensive and requires more effort for both the giver and receiver. To transfer a physical stock certificate, the owner needs to sign it in the presence of a guarantor, such as their bank or a stock broker.

5. Gifting Stock to Charity

Another option is to give the gift of stocks to a charity, as long as the charity is set up to receive them. This can benefit both the giver and the charity, because the giver doesn’t have to pay capital gains taxes, and as a tax-exempt entity, the charity doesn’t either. The giver may also be able to deduct the amount the stock was worth from their taxes.

For givers who don’t know which charity to give to, one option is a donor-advised fund, or DAF. While the giver can take a tax deduction on their gift in the calendar year in which they give it, the fund will distribute the gift to the charities over multiple years.

6. Passing Down Wealth

Gifting stocks to family members can be a better way to transfer wealth than selling them and paying taxes. For 2025, up to $19,000 per year, per person, can be transferred through gifting of cash, stocks, or a combination.

If a person wants to transfer stocks upon their death, they have a few options, including:

• Make it part of their will.

• Go through a beneficiary designation in a trust.

• Create an inherited IRA.

• Arrange a transfer on death designation in a brokerage account.

It’s important to look into each option and one’s individual circumstances to figure out the taxes and cost basis for this option.

7. Gifting Through a Roth IRA

Gifting stock through an IRA is not technically possible, as you can’t transfer stock from your Roth IRA to another person. But what you can do is gift the recipient funds that they can use to contribute to their own Roth IRA, with some stipulations. And there are thresholds, too, above which a gift could trigger a gift tax.

8. Gifting to Friends Through a Brokerage Account

Finally, you can gift your friends or another recipient via a brokerage account in a fairly straightforward way, assuming the recipient has a brokerage account of their own. Brokerages may have different processes for this, so you may need to get in touch with yours to see what the precise protocol is. But you’ll need the details of their brokerage account, at a bare minimum, and there could be tax implications following the transfer, too.

Things to Consider When Giving a Stock Gift

Gifting stocks is relatively straightforward, but there are some things to keep in mind. In addition to the $19,000 per year gifting limit and the capital gains tax implications of gifting, timing of gifts is important, and gifting may not always be the best choice.

For instance, when gifting to heirs, it may be better to wait and allow them to inherit stocks rather than gifting them during life. This may reduce or eliminate the capital gains they owe.

Also, there is a lifetime gift exclusion for federal estate taxes, which is $13.99 million in 2025, which can be used to shelter giving that goes over $19,000. However, this is not a great tax option, due to the ways gifts and inherited stocks are taxed.

Generally, an option to give a substantial amount of money to someone is to establish a trust fund.

Tax Implications of Gifting Stocks

There are some tax ramifications of giving stock as a gift.

Capital Gains Tax

There are a few things to be aware of with the capital gains taxes. If the stock is gifted at a lower value than it was originally purchased at, and sold at a loss, the cost basis for the recipient is based on the fair market value of the stock on the date they received it.

However, if the price of the stock increases above the price that the giver originally paid, the capital gains are based on the value of the stock when the giver bought it. In a third scenario, if the stock is sold on the date of the gift at a higher than fair market value, but at a lower value than the giver’s cost basis, no gain or loss needs to be recorded by the recipient.

• Tax implications for giving: When gifting stocks, the giver can avoid paying capital gains tax. can sometimes be a way for the giver and the receiver to avoid paying capital gains taxes.

• Tax implications for receiving: The recipient won’t pay taxes upon receiving the stock. When they sell it, they may be exempt from capital gains taxes if they’re in a lower tax bracket (consider, for example, a minor or retired individual). Otherwise, if they sell at a profit, they should expect to pay capital gains tax. If the annual gifting limit is exceeded, there may be taxes associated with that and the giver will need to file an estate and gift tax return.

How to Choose the Right Stock to Gift

If you choose to give a stock to someone, you might be wondering: Which stock do I actually give them?

There is no right or wrong answer, and perhaps the most important thing to do is give some thought to what the recipient may want or what they think is important. For example, you may not want to gift someone stocks from a fossil fuel company that is passionate about green or renewable energy. Or vice versa.

You may also want to do some basic research as to a stock’s recent performance, so that the recipient doesn’t think that you’re offloading a stinker that’s lost significant value in recent years.

It may be best to simply ask the recipient first; let them know your plans, and ask if they have a preference.

Selecting Blue-Chip vs. Growth Stocks

Assuming you have chosen to gift a stock, you may want to keep things relatively simple and choose a blue-chip or growth stock. These, typically, are stocks of well-known companies that the recipient should recognize.

How to Choose the Right Stock to Gift

As discussed, there may be some personal considerations to think about when choosing a blue-chip or growth stock to give. Ask some questions to get a feel for what the recipient may like, appreciate, or get jazzed about, and then see which stocks may fit the bill. Again: there may not be a right or wrong stock to give!

Understanding Dividend Stocks and Their Impact

If you decide to gift a so-called “dividend stock,” which could be a stock of a company that’s known for dishing out dividends to shareholders, you may want to be aware of the potential tax implications those dividends may have. And, accordingly, let the recipient know, if they’re unfamiliar with investing and the potential tax liabilities they could generate.

In short: Dividends are a form of income, which will generate a tax liability, and if they choose to sell the stock, capital gains taxes could come into play, too.

Recommended: What Are Capital Gains Taxes?

The Takeaway

Gifting stocks is a unique idea that may have benefits for both the giver and the receiver. As you plan for your future, you may decide to build up a portfolio of stocks that you intend to give to your children, parents, or others as you grow older.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

Who can I gift a stock to?

In general, you can gift a stock to anyone who has a brokerage account. It’s also possible to gift stock to charitable organizations, or children and minors through a custodial brokerage account.

How do I transfer stocks as a gift?

While the exact steps and protocols for transferring a stock as a gift may vary depending on your brokerage, in general, investors can contact their brokerage and give them the required information to initiate a transfer or transaction.

Are there limits on how much stock I can gift?

Not necessarily, but investors should know that if they gift more than the gift tax exclusion, which is $19,000 for 2025, it could trigger tax liabilities.

Do I need to pay taxes when gifting stocks?

If you gift more than the gift tax exclusion of $19,000 for 2025, gift tax liabilities could come into play. There’s also a lifetime gift tax exemption of $13.99 million for 2025.

What happens if the recipient sells the gifted stock?

If or when a recipient sells their gifted stock, they’ll likely be on the hook for capital gains taxes, as they’ll inherit the gifter’s original cost basis. There could be other tax implications as well, such as the “kiddie tax” or income taxes.

Photo credit: iStock/akinbostanci

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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

Mutual Funds (MFs): 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 clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

SOIN-Q225-157

Jul

2025

What Types of Stocks Do Well During Volatility?

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

Table of Contents

What Causes Volatility in the Stock Market?
Market Sectors and Volatility
Which Stock Sectors Perform More Favorably During Market Volatility?
Which Sectors and Stocks Tend to be More Volatile?
Volatility and Business Cycles
FAQ

Volatility is a measure of how much and how often a security’s price or a market index moves up or down over time. Higher volatility can mean higher risk, but it also has the potential to generate bigger rewards for investors. Meanwhile, lower volatility is typically correlated with lower risk and lower returns.

Developing a volatility investing strategy can make it easier to maximize returns while managing risk as the market moves from bullish to bearish and back again. Understanding the various stock market sectors and how they react to volatility is a good place to start. This can help with building a portfolio that’s designed with the goal of withstanding occasional market dips or in the worst-case scenario, a recession.

Key Points

• Volatility measures price fluctuations, correlating with risk and potential rewards.

• Defensive stocks, including utilities, consumer staples, and health care, tend to perform well during market downturns.

• Cyclical sectors, such as consumer discretionary and financials, are viewed or tend to be more sensitive to economic changes.

• The Cboe Volatility Index (VIX) can be used to try and predict market volatility.

• Diversifying investments across sectors can help manage risk.

What Causes Volatility in the Stock Market?

To implement a volatility investing plan it helps to first understand what causes fluctuations in stock prices to begin with. Stock market volatility can ebb and flow over time, and how high or low it is can depend on a number of factors. Some of the things that can push volatility levels higher include:

• Political events, such as elections

• Release of quarterly earnings reports

• Natural disasters

• The bursting of a stock market bubble

• Crises that in foreign countries

• Federal Reserve adjustments to interest rate policy

• News of a merger or acquisition

• Changes to fiscal policy

• Initial Public Offerings (IPOs) hitting the market

• Excitement over meme stocks

A global pandemic can also spark volatility, which occurred during the pandemic in 2020. That prompted the end of the longest bull market in history, sending stocks into a bear market.

The downturn was significant enough that the National Bureau of Economic Research Business Cycle Dating Committee dubbed it a recession. It was, however, the shortest on record, lasting just two months. (By comparison, it took 18 months for the stock market to go from peak to trough during the Great Recession).

Predicting volatility can be difficult, though there is a tool that attempts it. The Cboe Volatility Index (VIX) is a market index designed to measure expected volatility in the stock market. The VIX uses real-time stock quotes to calculate projected volatility over the coming 30 days.

The VIX is one factor that goes into the Fear and Greed Index, which is used to gauge the emotions driving the stock market.

Market Sectors and Volatility

The stock market could be divided into 11 different sectors. These sectors represent the various segments of the market, based on the industries and companies they represent. The 11 sectors identified by the Global Industry Classification Standard (GICS) are:

• Information technology

• Health care

• Financials

• Consumer discretionary

• Consumer staples

• Communication services

• Industrials

• Materials

• Energy

• Utilities

• Real estate

Some of these sectors include more volatile industries than others, and the share of stocks in those industries within a given portfolio can impact how the portfolio reacts during times of volatility.

Stocks that tend to bear up under the pressure of a downturn or recession are generally categorized as defensive. You may also hear the terms “cyclical” and “non-cyclical” used in reference to different market sectors. A cyclical sector or stock is one that’s volatile and tends to follow economic trends at any given time. Non-cyclical sectors or stocks, on the other hand, may outperform when the market experiences a downturn.

Which Stock Sectors Perform More Favorably During Market Volatility?

Defensive stock market sectors tend to do better when the market is in decline for one reason: they represent things that consumers still need to spend money on, even when the economy is weakening. That means they may be of interest if you’re investing during a recession.

The following sectors tend to do the best during times of volatility:

• Utilities

• Consumer staples

• Health care

Here’s a closer look at how each sector works.

Utilities

The utilities sector represents companies and industries that provide utility services. That includes gas, electric, and water utilities. It can also include power producers, energy traders, and companies related to renewable energy production or distribution.

Since people still need running water, electricity and heat during a recession, utilities stocks tend to be a safe defensive bet.

Consumer Staples

The consumer staples sector covers companies and industries that are less sensitive to a changing economic or business cycle. That includes things like food and beverage manufacturers and distributors, food and drug retailing companies, tobacco producers, companies that produce household or personal care items and consumer super centers.

In simpler terms, the consumer staples sector means things like grocery stores, drugstores, and the manufacturers of everyday products. Since people still need to buy food and basic household or personal care items in a recession, stocks from these sectors can do well when volatility is high.

Health Care

The health care sector includes health care service providers, companies that manufacture health care equipment, distributors of that equipment, health care technology companies, research and development companies and pharmaceutical companies.

Health care is a defensive sector since a recession usually doesn’t disrupt the need for medical care or medications.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

Which Sectors and Stocks Tend to be More Volatile?

When a recession sets in, defensive sector stocks may provide a favorable buy option. The period before a recession begins is often marked by increased volatility and declining stock prices. The impacts of that volatility may be more deeply felt in these sectors:

• Consumer discretionary

• Financials

• Communication services

• Energy

• Information technology

• Commodities

• Industrials

• Materials

These sectors represent more volatile industries that are more likely to be affected by large-scale market trends. For example, the financial sector suffered a serious blow leading up to the Great Recession. A decline in home prices paired with faulty lending practices prompted widespread defaults on mortgage-backed securities, leading a number of financial institutions to seek government bailout funding.

On the other hand, some of these same sectors do well when the economy is coming out of a recession and entering the early stage of the business cycle. For example, the consumer discretionary sector, which includes things like travel and entertainment, typically rebounds as consumers ease their purse strings and start spending on “fun” again. The industrials and materials sectors may also pick up if there’s an increase in manufacturing and production activity.

Understanding the relationships between individual sectors and the business cycle can make it easier to implement a sector investing approach. With sector investing, you’re adjusting your asset allocation over time to try and stay ahead of the economic cycle.

If you suspect a recession might be coming, for example, a sector investing strategy would dictate shifting some of your assets to defensive stocks. On the other hand, if you believe a recession is about to end and stocks are set to bounce back, you may shift your allocation to include more volatile industries that tend to do better in the early stages of the business cycle.

Volatility and Business Cycles

Identifying volatile industries generally means considering which sectors or stocks are most sensitive to changes in the economic cycle. Aside from recessionary periods, the business cycle has three other stages:

Early Stage

The early stage of the business cycle typically represents the initial recovery period following a recession. Consumers may begin spending more money on non essentials as the economy begins to strengthen. This is also called the expansion phase, and it may coincide with periods of inflation.

Mid Stage

During the mid stage, the economy begins to hit a peak or plateau with growth leveling off. People are still spending money but the pace may begin slowing down.

Late Stage

The late stage is also called the contraction stage, as economic growth lags. The late stage of the business cycle is usually a precursor to the trough or recession stage.

The Takeaway

Volatility is unavoidable but there are things investors can do to help minimize the impact to their portfolio. Diversifying with assets such as stocks, exchange-traded funds (ETFs), or IPOs could help create volatility hedges. But remember that certain securities or market sectors perform differently depending on overall market conditions. That means that when the market is volatile, some stocks will overperform while others underperform.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What is market volatility?

Market volatility is a measure of how much and how often a security’s price or a market index moves up or down over time. Higher volatility can mean higher risk, but it also has the potential to generate returns for investors.

What are the sectors of the stock market?

The 11 sectors of the stock market are information technology, health care, financials, consumer discretionary, consumer staples, communication services, industrials, materials, energy, utilities, and real estate.

Which stocks perform favorably during market volatility?

Utilities, consumer staples, and health care stocks tend to overperform during times of volatility, as consumers generally need the products and services produced by those industries no matter what. That said, there’s no guarantee that they would necessarily outperform other types of stocks.

About the author

Rebecca Lake

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

Photo credit: iStock/Serdarbayraktar

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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 emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

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

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation Procedures.

¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOIN-Q225-148

Jul

2025

How Does Magic Formula Investing Work?

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

Table of Contents

What Is Magic Formula Investing?
What Is the Magic Investing Formula?
How Magic Formula Investing Works
Magic Formula Investing Results
Pros and Cons of Magic Formula Investing
FAQ

Magic Formula investing is a rules-based investing strategy developed by hedge fund manager and professor Joel Greenblatt. First outlined in his book, The Little Book That Beats the Market, the magic formula investing strategy takes a simplified approach to choosing investments.

Magic Formula Investing draws on principles of value investing to create portfolios that seek to outperform the market. For interested investors, knowing the ins and outs of the strategy before applying it is important.

Key Points

• Magic Formula Investing is a strategy developed by Joel Greenblatt, focusing on good companies at attractive prices.

• Stocks are screened using earnings yield and return on capital as primary criteria.

• The strategy notes that selecting 20 to 30 top-ranked companies, may help build a diversified portfolio.

• Magic Formula suggests a holding period for stocks is 12 months to help increase potential after-tax returns.

• Limitations include exclusion of foreign, financial, and utility companies, with no guaranteed positive returns.

What Is Magic Formula Investing?

At its core, Greenblatt’s Magic Formula Investing strategy focuses on finding good companies to invest in that are trading at attractive prices. Specifically, this strategy focuses on two things: Stock price, and the cost of capital.

The Magic Formula provides a way to help investors find or pinpoint companies that they deem undervalued by the market, and that may potentially offer a high return on their invested capital. It shares some similarities with value investing, which emphasizes finding the “hidden gems” that trade below their intrinsic value.

Value investors often follow a buy-and-hold strategy, in which securities are purchased with the intent to hold them long-term. The idea is that even though the market may have undervalued a company, it could grow in value over time and result in higher returns once an investor decides to sell.

This strategy utilizes fundamental analysis, which involves looking at things like revenue and earnings, and calculating return on equity to measure a company’s financial health.

The difference between a buy and hold strategy and Magic Formula Investing is that fundamental analysis doesn’t come into play. Instead, the formula relies on Greenblatt’s stock-screening method to identify the most promising stocks to invest in.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, an investment platform you choose should offer the features that you need to manage your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

What Is the Magic Investing Formula?

Screening stocks using the Magic Formula method is based on a rankings system. As developed by Greenblatt, this system uses three distinct criteria to rank companies:

• Earnings before interest and taxes (EBIT)

• Earnings per share

• Return on capital

Earnings Before Interest and Taxes (EBIT)

This is one way to measure a company’s profitability. This figure represents the net income of a company before income tax expense and interest expenses are deducted. To calculate a company’s EBIT, you’d subtract income tax expense and interest expenses from its revenue.

Earnings Per Share (EPS)

EPS is another measure of profitability, though it’s calculated differently than EBIT. With EPS, you divide a company’s net profit by the total number of common shares of stock it has outstanding. This is also a way to measure a company’s value, since EPS can tell you roughly how much money it makes per share of stock. A higher EPS may suggest higher value and a willingness for investors to pay more for shares of a company’s stock.

Return on Capital

Return on capital measures how well a company is able to allocate its capital to investments that are profitable. To figure out this number, you’d subtract dividends from net income, then divide that by the sum total of the company’s debt and equity.

By applying EBIT, EPS, and return on capital, the Magic Formula method is intended to determine quality companies at an attractive price.

How Magic Formula Investing Works

For investors interested in using the Magic Formula to help build a portfolio, there’s a specific sequence of steps to follow that Greenblatt outlines.

1. Set a Market Capitalization Threshold

Market capitalization (commonly known as market cap) represents the current number of shares of stock a company has outstanding multiplied by the price per share. Companies can be categorized as small-cap, mid-cap or large-cap, based on their market capitalization.

Engaging in Magic Formula Investing, an investor will typically start by excluding any companies with a market capitalization below $100 million. But one could set this number higher or lower, depending on personal preferences. Greenblatt advocates setting the threshold at $1 billion (which means large-cap) to help minimize volatility.

2. Exclude Certain Securities

In Magic Formula Investing, an investor next should eliminate several categories of investments. Those include stocks in the financials and utilities sectors, as well as foreign companies and American Depositary Receipts (ADRs). An ADR offers a way to indirectly own foreign companies that aren’t traded on U.S. stock exchanges.

3. Make the Necessary Calculations

Once an investor has narrowed down their list of companies, they can start running the numbers. Specifically, this means calculating:

• Earnings before interest and taxes (EBIT)

• Earnings yield (EBIT divided by enterprise value, which is a company’s total value as measured by its market capitalization plus total debt minus its cash assets)

• Return on capital (EBIT divided by the sum total of net fixed assets and working capital)

4. Create Your Rankings

After doing the above math, an investor can move on to ranking companies according to the Magic Formula — from highest earnings yield and highest return on capital to lowest. From this point on, one would focus on the top 20 to 30 companies when choosing how to invest.

5. Start Building Your Portfolio

Greenblatt suggests buying the stocks that rank in that top 20-30 list on a rolling basis. For instance, an investor may consider buying two to three positions per month for one year, eventually owning 24 to 36 of the top ranking companies. According to Greenblatt’s formula, owning at least 20 different companies will help to maintain diversification.

At the end of the 12-month period, the Magic Formula dictates that investors would sell off the losing stocks and the winners, being mindful of capital gains taxes rules. Then they’d start the cycle over again, using the Magic Formula rules to select a new crop of stocks to invest in.

Holding stocks for a year before selling at a gain or loss is intended to help maximize potential after-tax returns. When you sell stocks at a profit that you’ve held longer than one year you’d be subject to the more favorable long-term capital gains tax rate.

💡 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.

Magic Formula Investing Results

Any time one is considering an investment strategy, it’s important to understand how it works and how it aligns with your goals and risk tolerance. Greenblatt’s approach is intended to help investors choose companies whose performance can potentially beat the market. Magic Formula is considered to be a tool for long-term investors seeking a disciplined, value-oriented strategy and has historically demonstrated strong outperformance of markets such as the S&P 500.

There’s no guarantee, however, that investors will see a positive return utilizing the strategy for any given year and, as with any investing strategy, there is also the risk of seeing losses.

Whether investors can replicate those Magic Formula Investing results for themselves can depend on different variables. For example, an individual portfolio may produce a very different return profile if an investor adjusts the market capitalization threshold up or down. Or if a company has an above-average year for revenue and profits, that could affect how the ranking calculations shake out.

Pros and Cons of Magic Formula Investing

The main idea behind the Magic Formula method is that it may be an option for even beginner investors to use. The idea is that by following the formula, an investor can eliminate some of the noise when making investment decisions.

That includes not giving in to investment biases that could prompt an investor to buy or sell at the wrong time. By focusing on the rankings and sticking with a one-year rolling schedule of buying and then selling, an investor can potentially remove their emotions from the equation. This can help avoid selling off stocks in a panic if the market becomes more volatile.

Downsides of Magic Formula Investing

While this formula can help an investor create a diversified portfolio, it’s still exclusionary in that it doesn’t include investing in foreign companies or companies in the financials and utilities sectors.

Beyond that, there’s no certainty that an investor will see positive results in the form of above-average returns — as noted. Greenblatt himself says that there’s nothing “magical” about the formula and that it shouldn’t be considered a guarantee of investment returns or performance. As with any investing strategy, it isn’t foolproof.

Finally, the Magic Formula Investing strategy is meant to be a long-term one. For investors more interested in seeing quick results versus adopting a buy and hold mindset, day trading might be an option to consider, though it is higher-risk.

The Takeaway

Hedge fund manager and professor Joel Greenblatt devised his Magic Formula Investing strategy as a way to invest in a curated group of good companies with high potential for returns. The system ranks companies according to three criteria: earnings before interest and taxes (EBIT), earnings per share, and return on capital. The system is intended for anyone from first-time investors to more seasoned investors.

But as with any investment strategy, there is no guarantee that the magic formula investing results will be positive every time. There is a potential for both gains and losses.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What is the Magic Formula Investing strategy’s formula?

Magic Formula Investing is a strategy to choose specific stocks, and it utilizes a ranking system, developed by Joel Greenblatt, that uses three distinct criteria to rank companies: Earnings before interest and taxes (EBIT), earnings per share, and return on capital.

What returns does the Magic Formula Investing method supply?

The Magic Formula was designed to help investors outperform the market over a long period of time. But depending on the specifics of an investor’s portfolio, returns can vary wildly, and it’s possible the strategy could lead to losses as well.

What is the “magic” in Magic Formula Investing?

Magic Formula Investing is a stock-screening method used to identify companies that might be undervalued. Unfortunately, there is no magic in the formula or strategy, and there’s no guarantee that it will yield returns for investors.

About the author

Rebecca Lake

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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

S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

SOIN-Q225-146

Guide to Market-on-Open Orders

What Is a Market-on-Open (MOO) Order?

How Market-on-Open Orders Work

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.

Different Order Types

Market Order

Limit Order

After-Hours Trading

3 Reasons to Use a Market-On-Open Orders

Trading Outside of Operating Hours

Anticipating Changes in Value

The News Cycle

Examples of MOO Trade

Example 1

Example 2

Example 3

Risks of Market-on-Open Orders

Volatility at the Open

Using Limit-on-Open Orders

Liquidity Issues

Creating a Market-on-Open Order

The Takeaway

FAQ

What is a market-on-open order?

What is a market-on-open limit on open?

What is the difference between market-on-close and market-on-open?

What Is a Divestiture?

What Are Reasons a Company Would Divest Itself?

What Happens in a Divestiture?

1. Monitoring the Portfolio

2. Identifying a Buyer

3. Executing the Divestiture

4. Managing the Financials

What Are The Different Types of Divestitures?

What Causes a Company to Divest?

External Developments

Internal Developments

Divestiture Strategy Example

The Takeaway

FAQ

What does it mean when a company makes a divestiture?

What are the different types of divestitures?

What could cause a company to make a divestment?

How to Gift a Stock

The Benefits of Gifting Stocks

8 Ways to Gift Stocks

1. Set Up a Custodial Account for Kids

2. Set up a DRiP

3. Gifting to a Spouse

4. Virtual Transfers and Stock Certificates

5. Gifting Stock to Charity

6. Passing Down Wealth

7. Gifting Through a Roth IRA

8. Gifting to Friends Through a Brokerage Account

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.

Things to Consider When Giving a Stock Gift

Tax Implications of Gifting Stocks

Capital Gains Tax

How to Choose the Right Stock to Gift

Selecting Blue-Chip vs. Growth Stocks

How to Choose the Right Stock to Gift

Understanding Dividend Stocks and Their Impact

The Takeaway

FAQ

Who can I gift a stock to?

How do I transfer stocks as a gift?

Are there limits on how much stock I can gift?

Do I need to pay taxes when gifting stocks?

What happens if the recipient sells the gifted stock?

What Types of Stocks Do Well During Volatility?

What Causes Volatility in the Stock Market?

Market Sectors and Volatility

Which Stock Sectors Perform More Favorably During Market Volatility?

Utilities

Consumer Staples

Health Care

Which Sectors and Stocks Tend to be More Volatile?

Volatility and Business Cycles

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