How To Calculate Marginal Propensity to Save

Guide to Marginal Propensity to Save (MPS)

The marginal propensity to save (MPS) is an economic concept that says when a person’s income rises, the MPS will determine the amount of money that is saved vs. spent on goods and services. This is an element in Keynesian Economic Theory, and it can have an important impact. The MPS can enable economists to figure out how to spend either government dollars or private funding.

But does MPS impact the average individual’s savings account? It can be a useful notion, and in this article you will learn:

•   What is marginal propensity to save (MPS)?

•   Why does MPS matter?

•   What does MPS mean to the average person?

The Keynesian Economic Theory, Explained

Economist John Maynard Keynes published The General Theory of Employment, Interest, and Money, or simply as The General Theory, in 1936. This text changed economic thought from that point on and is known as one of the classic economic publications. In the book, Keynes tried to explain economic fluctuations, especially the ones seen in the Great Depression of the 1930s.

Essentially, The General Theory was built on the idea that as a result of inadequate demand for goods and services, recessions and depressions could occur. Keynes’ theory was not just for economists—it was intended for policymakers worldwide. Keynes advocated for an increase in government spending, which would boost the production of goods and services to minimize unemployment rates and enhance economic activity. In general, this theory went against the traditional economic policy of laissez-faire, which requires minimal government involvement.

There are three main elements of this theory. These elements include:

Aggregate demand: This is the demand influenced by the public and private sectors. The level of demand in the private sector may impact macroeconomic conditions. For instance, a lull in spending may bring an economy into a recession. At this point, the government can intervene with monetary stimulus.

Prices: Wages, for example, are often slow to respond to supply and demand changes. This may result in an excess or shortage of labor supply.

Changes in demand: Any change in aggregate demand results in the most considerable impact on economic production and employment. The theory states that consumer and government spending, investments, and exports increase output. Therefore, even a change to one of these factors and the output will change.

The Keynesian Multiplier was created as a result of the change in aggregate demand. The Keynesian Multiplier states, “The economy’s output is a multiple of the increase or decrease in spending. If the fiscal multiplier is greater than 1, then a $1 increase in spending will increase the total output by a value greater than $1.”

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Calculating Marginal Propensity to Save

The Keynesian Multiplier value relies on the marginal propensity to save (MPS) and the marginal propensity to consume (MPC). Here’s how you can calculate the marginal propensity to save.

Marginal Propensity to Save Formula

When people receive additional income, the MPS is the change in the savings amount. If their income increases, the MPS measures the amount of income they choose to save instead of spending it on goods and services.

That said, this is how to calculate MPS: MPS = change in savings / change in income.

For example, let’s say someone received a $1,000 raise. Of that $1000 increase in income, they decide to spend $300 on new clothes, $200 on a fancy dinner out, and save the remaining $500, so the MPS is 0.5.

(1000 – 300 – 200) / 500 = 0.5

Marginal Propensity to Consume

Conversely, the MPC is the change in the spending, or consuming, amount. If someone’s income increases, the MPC measures the amount of income they choose to spend on goods and services instead of savings.

With this in mind, MPC is calculated as MPC = change in consumption / change in income.

By using the example above, the MPC would be 500 / 1000 = 0.5.

According to Keynesian economic theory, when production increases, the level of income rises too, triggering an increase in spending.

Marginal Propensity to Save Example

As mentioned above, the marginal propensity to save can be illustrated by someone getting a raise. If you receive a $5,000 raise and decide to spend $2,500 on a vacation and save the other half.

The MPS would be change in savings / change in income, or $2,500 / $5,000, or 0.5.

Top 3 Factors That Influence Saving

Knowing how to find MPS and MPC may seem pretty straightforward. However, both calculations only account for the excess of disposable income; the calculations don’t account for other factors that may influence a consumer’s consumption functions. If one of these non-income factors shifts, the entire consumption function may shift.

Here are some of the non-income factors that may influence a consumer’s consumption function.

1. Wealth

Wealth and income are two different variables in economics. For example, suppose Javier has a job earning $60,000 per year. If his aunt Ines passes away and leaves him $200,000 as an inheritance, his income is still $60,000 per year, but his wealth has increased.

Similarly, if Javier owns a piece of art that increases in value or his investment portfolio grows, his wealth has also gone up. Just because his wealth increases doesn’t mean his income does as well.

Therefore, an increase in wealth may increase consumption despite income levels staying the same. However, both the consumption and savings function may shift upwards as well because of the newfound wealth. The same is true in the opposite situation. If wealth decreases, the consumption and savings functions may decrease as well.

2. Expectations

In some cases, consumers may adjust their spending habits based on the expectation of future income coming their way. Expectations change the shift in consumption and savings functions because there is no change in actual income, just how it’s being spent.

For example, suppose Naomi assumes her income is going to increase soon. She may consume more now because of her expectation that her income is about to grow. This may highlight an upward shift in the consumption function without an increase in income.

On the other hand, if Naomi were pessimistic about her future income, such as the fear of losing her job, she may decrease her consumption without dropping her income. This scenario may also shift the consumption factor.

Debt

Consumers may also adjust their consumption and savings if they’re in debt. It’s observed that in economies where consumer debt rises, savings go up while consumption goes down. There is a level of debt when consumers typically feel uncomfortable spending more. Even if their income remains the same, if too much debt plagues their pocketbooks, they will start to save more and spend less so they can pay off their debt.

Conversely, if there are low levels of debt, consumers tend to spend more and save less.

Recommended: What is the Average Savings by Age?

Why Marginal Propensity to Save Matters

Using the data from MPS and MPC helps businesses, governments, and foreign policymakers determine how funds are allocated. For example, economists can assess this data to determine increases in government spending or investment spending, influencing savings numbers.

As for consumers, using the marginal propensity to save formula can help them make adjustments to their own spending habits. If their MPC is higher than their MPS, adjustments to consumption may need to be made.

How to Start Saving Money

While the way consumers spend helps the government and economists determine the best way to increase government spending, the way you choose to spend your money can help you set up a solid financial future. Carefully considering all of your spending options may get you on a path toward financial security. Being motivated to save money can have long-term benefits.

So if a windfall comes your way, you may want to consider carefully choosing how to spend those funds. While it’s tempting to use the money on a shopping spree, putting it in some type of savings account may be a better financial decision. After all, saving your extra disposable income can help build an emergency fund, avoid taking on debt, and accumulate a nest egg for your retirement.

Here are a few steps for getting started, even when it feels hard to save money:

Identifying Your Savings Goals

Do you have short-term goals like accumulating an emergency fund to pay for unexpected expenses? Or perhaps you want to save for a family vacation? Maybe you have a medium-term goal, such as paying for a wedding reception or a new kitchen renovation. Or would you like to save for retirement as a long-term goal? No matter your goals, you’ll want to have a clear idea of how much cash you need and by when.

First, decide on a goal date — when you want to have the money saved by. Then, divide the goal amount by the time frame, in months, to determine how much cash you need to stash away each month. Finally, decide where to keep the funds.

•   If your goal is short-term, you may want to consider putting your cash in a high-interest savings account or money market account. Either type of account is relatively low risk and is likely to be FDIC or NCUA insured, depending on the financial institution.

•   If the goals are more long-term, retirement accounts or brokerage accounts are worth considering since they may help your money grow.

Recommended: Take the guesswork out of saving for emergencies with our user-friendly emergency fund calculator.

Creating a Budget

It’s hard to track your money if you don’t know where it’s going. Creating and sticking to a budget is a great way to monitor your spending habits so you can stay on track.

•   To start, take note of your income and expenses for a month or two.

•   Next, create a monthly budget that reflects the average spending amounts for fixed expenses such as your mortgage and variable expenses such as eating out or clothes shopping. Also note money that goes towards savings.

•   If you determine you’re spending more than you earn, you may want to look for ways to cut back on your expenses, such as canceling subscriptions you don’t use. Or you could bring in more earnings by starting a side hustle or selling items that are still useful but that you don’t need.

Using a tool like SoFi or another digital tool makes it easy to track and categorize your expenses. It also helps you find ways to save and lets you monitor your progress toward your goals.

Recommended: Struggling to create a balanced budget? Try our 50/30/20 budget calculator for a simple solution.

Opening a Savings Account

When you receive an increase in your income, setting up automatic contributions to your savings or retirement accounts allows you to set aside extra money by automating your savings instead of having to manually transfer money each month. Look for an account with higher than average interest rate, typically found at online vs. traditional banks.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

Can MPS be greater than 1?

The marginal propensity to save (MPS) cannot be greater than one since it is a change in savings, and that difference cannot be greater than one, nor less than zero.

How do you calculate the marginal propensity to save?

To calculate the MPS, or the marginal propensity to save, use the formula of change in savings divided by change in income.

What is the difference between average and marginal propensity to save?

The average propensity to save is defined as the ratio of total savings to total income. However, when talking about the marginal propensity to save, or the MPS, that is the ratio of change in savings to a change in income. The latter reflects a shift.

Photo credit: iStock/MarsBars


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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8 Ways to Make Your Money Work For You

If you want your money to grow more quickly and to feel confident that you’ll reach your financial goals, you’re in the right place. This guide will show you how to make your money work harder for you. There are smart ways to maximize every single dollar you earn. Yes, it will take some planning and focus, but it can have very real rewards.

A few tactics to make the most of your money involve leaning into your personal finances and recognizing the importance of financial literacy. Once you’re committed to doing that, you can take such steps and budgeting well, maximizing interest and rewards on your cash, spending smarter, and automating your savings.

Key Points

•   Effective budgeting is crucial for understanding your spending habits and making the most of your money.

•   Paying off debt should be a priority to free up funds and make your money work for you.

•   Opening a high-yield savings account can help you save money for short-term goals and earn more through higher interest rates.

•   Considering passive income streams, such as rental properties or investments, can provide additional income and financial stability.

•   Investing as part of your financial plan can help grow your wealth over the long term, but it comes with risks and requires careful consideration.

Making Your Money Work For you

These tips and ideas can help you put your money to work.

1. Learning How to Budget

An effective budget can help you make the most of your money, allowing you to understand where you are spending, so that you can feel empowered to save, and spend, on things that are most important to you. With the right tools on your side, you can learn how to make your money work for you.

These budgeting tips can help you get started:

Layout Your Finances

An effective budget is an accurate budget. If you are starting your budget from scratch, some recommendations suggest reviewing three months’ worth of receipts, bills, etc., before moving forward. This will give you insight into your current spending habits. Then, split those expenditures into needs and wants.

A budgeting tip: The information for making your budget should be accessible. Depending on your preferences that may be a physical copy, a spreadsheet, or using an app that can help you stay on top of your budget and expenses. SoFi, a money-tracking app, lets you see all of your accounts in one central location so that you can easily see where the money is coming, where it’s going, and where you can shift things around.

Figure Out Your Net Income

After you know how much you’ve been spending, you want to compare it to how much you earn. When making a budget, it can help to work with your take-home pay. This is the total income you earn from your job, after taking out all the required taxes, savings, and insurance payments from it. Those who are self-employed may work with different deductions than those who work a regular 9-to-5. In that case, subtract your self-employment tax (the sum of Social Security and Medicare taxes).

Using your after-tax pay can help you determine an accurate total for how much money you actually have available to spend. If you have any other income earners in your household, do factor in their income as well. Also include any investments or additional sources of income.

Plan Your Budget

Now comes the moment of truth. You have to create a step-by-step plan and put it into action. One method you may want to think about is the 50/20/30 budget. This budgeting method breaks your spending and savings into the following amounts: 50% for your needs, 30% for wants, and 20% for savings. If they need adjusting, shift the numbers to suit your plan.

Tracking multiple categories may not work for you, though. If you have trouble logging expenses in hyper-specific categories, simplify them. Overwhelming yourself will only make it harder for you to stay on target.

Review and Adjust

No matter how perfect the plan, things change. You might switch jobs, have a child, move somewhere else, or gain new needs. That’s why your budget can be flexible. When things change, change your budget to reflect those new priorities. If you have trouble fixing the plan, you may need to revisit some of the previous planning stages. Your budget and money should work for you, after all.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 3.80% APY, with no minimum balance required.

2. Getting Out of Debt

More than anything, getting out of debt means finding ways to make your money work for you. Whether it’s more robust savings tactics or new repayments strategies, there are options. So if you want to take the burden of debt off of your shoulders, here are some methods to try out.

It’s easy to say you need to pay off a debt. But it’s another thing actually to have the money for it. So before you cut down your expenses, you may need to save up first. A high-yield savings account is an available option that can help you build wealth to meet your financial goals.

Selecting a Debt Repayment Strategy

What do you think of when you hear the words “snowflake,” “snowball,” and “avalanche”? Perhaps you picture snow-capped mountains or blustery winter sports. But they’re the names for some of the most popular debt repayment strategies. While these strategies encourage individuals to make additional payments on some of their debts, making the minimum payments on all debt is important.

•  The snowflake method encourages individuals to put any extra cash earned toward debt repayment. Any time there’s excess to play with, you put it towards your debt. Since that helps you pay over your monthly minimum, you’ll eventually finish off the debt. You can earn additional money in any way that works for you. For example, some people start low-cost side hustles in their free time, or you can try selling items you don’t want anymore.

•  With the snowball strategy, you pay off your debts from smallest to largest, when evaluating the total amount owed. During this, you still make minimum payments on all your other debts. While it’s motivating to see some of your financial troubles disappear, this may not work for you. The snowball method ignores interest rates, which gives a chance for other debts to grow.

•  The avalanche method works on the debts with the highest interest rates first.

Unsecured debts, like credit card balances and personal loans, often come with unfavorable interest terms. Leaving them alone allows your debt to grow exponentially when you’re not looking. Focusing on debts with the highest interest rate first could help you escape debt quickly and potentially spend less in interest overall.

3. Opening a High-Yield Savings Account

A high-yield savings account is an available option that can help you build wealth to meet your financial goals. High-yield savings accounts work similarly to traditional savings accounts. However, they have a greater annual percentage yield (APY), which indicates how much money you can earn in interest. While you still have to pay income taxes on that interest, these accounts are a great way to save money for significant, short-term expenses.

Another critical feature high-yield savings accounts have is their limited accessibility. You can’t make withdrawals as frequently as you do with a checking account. In addition, they come with monthly limits on deposits and withdrawals. So, you won’t be as tempted to touch the funds.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

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4. Considering Passive Income Streams

America’s workforce is changing with the times. As the cost of living rises, many people want to find ways to increase their income. Many are turning to passive income to combat these financial hurdles, which may be the solution to your debt.

Essentially, passive income is money that you earn without active involvement, outside of what you earn as a regular wage and salary. Instead, you put something you own to work, such as a rental property. Other examples of passive income include dividends from stock investments, royalties, and product sales.

So, you still might put in some effort getting started, but not as much as your full-time job. Side hustles are one of the best ways to pad that income. You can put the extra cash flow directly towards your debt and interest, weekly necessities, or your savings.

5. Considering Investing as a Part of Your Financial Plan

Analyzing your situation and finding an acceptable amount of money to invest can help long-term. Investing can be an important part of a well-rounded financial portfolio for long-term goals such as retirement.

Investing has the potential for a higher return on investment vs. a savings account, but the reward isn’t guaranteed. Unlike cash-based interest accounts, your portfolio balance will fluctuate with the market and isn’t covered by, say, Federal Deposit Insurance Corporation (FDIC) insurance.

Because of the risk associated with putting money into the market, some people may be hesitant to jump in, especially if they don’t fully understand how investing works. Getting a headstart on saving and investing can help you get prepared for retirement.

6. Automating Bill Pay or Automatic Savings

To avoid missing bill payments, consider an automatic payment system. Alternatively known as “autopay,” this technology automatically withdraws funds from your bank account or credit card. Then it transfers to the necessary vendor. Once you set it up, you don’t have to deal with the pressure of juggling repayments. Instead, you just have to make sure there are enough funds in your account for the withdrawal.

Paying bills on time history makes up about 35% of your overall FICO® score, so enrolling in autopay could potentially have the added benefit of building your credit score.

It’s also possible to automate contributions to retirement accounts or savings accounts. This could help keep you on track for your savings goals. It allows you to pay yourself first, and getting money siphoned out of your checking account right around payday can help you steer clear of spending it.

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no fees online — and earn up to 0.50% APY, too.

7. Ditching the Fees

Fees charged by financial institutions can add up. Here are a few to consider avoiding:

Bank Fees

The list can include account maintenance fees, returned deposits, foreign transactions, account minimum fees, replacing a lost or stolen card, ATM fees, making too many savings withdrawals, writing too many checks, closing an account, not using an account enough, speaking with a human, paying late, or even paying off a loan too early.

In fact, American households spent $133 billion in credit card interest and fees in the most recent year studied. That’s your money flying away…Ouch.

ATM Fees

At an average of $4.73 a pop, out–of-network ATM fees can add up quickly. One way to avoid paying ATM fees is to always make sure that you’re using one of your bank’s designated ATMs. However, if you’re on the road or your bank only has a few networked ATMs, that can be a challenge.

Just like bank fees, however, more and more financial institutions are offering fee-free ATM usage as part of their perks. Especially if you use an online checking account, this can add up to hundreds of dollars in savings.

Investment Fees

Paying a traditional financial advisor a percentage of your account balance to manage, monitor, and optimize your portfolio could be worth the expense, but it might not be an option that is available to everyone.

Financial advising is still a confidence-booster for the majority of investors who use it. But when advisors charge a typical fee of 1% a year based on your portfolio balance, your total return can be significantly impacted.

Fortunately, a growing number of competitors are offering the same types of advising service with little or no fees — and no humans. Robo-advisors are becoming more popular because they use algorithms to optimize portfolios, thus eliminating the overhead of live employees.

Still other products offer the best of both worlds, with human advisors willing to help at the cost of an automated system.

8. Getting Rewarded for Spending

You also can find several ways to get rewarded for spending, such as retailer loyalty programs, coupons, or rebate apps. Cashback or reward credit cards can also be an effective way to save at your favorite store, provided you pay your statement balance in full every time it comes due.

The Takeaway

Things like effective budgeting, opening a high-yield bank account, paying off debt, establishing a passive income stream, and investing can help you make the most of your money.

Everyone’s financial situation is different, and what works for one person may not work for another. A bit of experimenting can be helpful, as can finding the right banking partner.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
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.


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 Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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A Guide to Large Personal Loans

A Guide to Large Personal Loans

Personal loans can be an important financial tool. They typically allow borrowers to access funds to spend as they see fit, with few exceptions, and do so at a lower interest rate than would be charged if they used a credit card.

To be more specific, with money from a large personal loan, you could cover higher-cost expenses like a single, substantial expense or several smaller debts consolidated into one large one. For example, If you plan to purchase a used car or some land to build on in the future, you might choose to finance it with a personal loan. Or perhaps you want to eliminate your credit card debt, buy a new laptop, and pay off the bill for some dental work. Those could also be paid off with a single, more substantial personal loan.

To help you understand whether a large personal loan could be the right next step to suit your needs, read on.

What Is a Large Personal Loan?

A large personal loan is exactly what it sounds like — a loan for a lot of money. There is no specific figure that makes a personal loan cross over into that “large” territory. To one person, $50,000 might be a large personal loan. To another, it might be $100,000. But typically, it’s a number that’s well into the five-figures realm.

A large personal loan is a form of credit that can be used to make large purchases or consolidate other high-interest debts. Personal loans generally have lower interest rates than credit cards and are sometimes used to consolidate high-interest debt.

To start with the basics, a personal loan is defined as a set amount of money borrowed from a lending institution. Unlike a mortgage loan or auto loan, which is used for a specific purpose, funds from a personal loan can be used to pay for a variety of expenses such as medical bills, K-12 private education costs, or to consolidate multiple debts. Typically, however, you can’t use a personal loan for business expenses or higher education tuition.


💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

How Do Large Personal Loans Differ From Other Personal Loans?

Personal loans function in the same way, no matter their size because they are borrowed sums of money that are paid back with interest. This is true regardless of the amount of money borrowed.

However, there are some differences between larger personal loans and their smaller counterparts depending on the lender you choose.

Small Personal Loans

Large Personal Loans

Loan amounts approximately $1,000 to $5,000 Loan amounts approximately $50,000 to $100,000
Including fees, may not be cost effective compared to larger loans With good to excellent credit scores, applicants may qualify for low interest rates
Typically have shorter repayment terms Repayment terms are typically longer

Average personal loan interest rates may change depending on the size of the loan.

When Is a Large Personal Loan a Bad Idea?

A large personal loan may be a bad idea if you already struggle with your current debts or monthly expenses.

When considering financing, it’s important to know both the pros and cons of a personal loan. Whether a loan is a right choice for you depends on your unique financial situation. Here are some of the risks to consider:

•   If you fall behind on payments, your credit score could be negatively affected.

•   If you miss enough loan payments, your large personal loan may go to a collections agency. Some lenders will charge off a debt, meaning they gave up on being repaid, but you’re still legally responsible for the debt.

In the right situation, however, a large personal loan can be helpful. If you’re approved for the loan, you’ll have the funds to make a big purchase and can repay it over time. Those smaller, monthly installments mean that the burden is more manageable.

What Are Common $100,000 Loan Qualification Requirements?

Typically, lenders have stricter requirements to qualify for a large loan than one with a smaller limit.

Credit Score

Generally, you need a minimum credit score of 720 to qualify for a $100,000 loan. However, it’s ideal to have a score of 750 or above. Depending on your score, your lender may offer you varying loan terms.

Checking your credit report before applying for any loan is a good idea. You will be able to find any errors or discrepancies and have an opportunity to correct them before you begin applying for a loan.

Checking your credit score counts as a soft inquiry and doesn’t negatively impact your credit score. The Fair Credit Reporting Act guarantees you access to one free credit report from each of the three major credit bureaus annually. You can find yours at AnnualCreditReport.com.

Recommended: Does Checking Your Credit Score Lower Your Rating?

Employment Status

One of the factors your lender will consider is your employment status. They want to see how much income you earn and if you have the resources to repay the loan. In addition, the lender wants to be assured of your job stability. It may be a good idea to avoid making any sudden career changes while you’re applying for a loan.

Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is a number that compares the total amount of debt you owe per month to your monthly earnings. You can find yours by taking your total recurring monthly debt and dividing it by your gross monthly income. Your recurring debt includes your mortgage, student loans, and other loans, and your gross income is everything you earn before taxes or other withholding.

Lenders use this number to help them predict a borrower’s ability to repay current and future debt. In general, lenders look for a DTI under 36%, but borrowers with a higher DTI may be approved if they are well qualified in other areas.

What Is the Application Process for a Large Personal Loan?

Getting approved for a personal loan is a multi-step process. Different lenders may have different processes, but typical steps are as follows.

Compare Rates

Some lenders may offer loan prequalification. This allows you to see, based on a soft credit check, potential interest rates for your personal loan and terms you might qualify for. It can be a good way to compare your lending options and find the best offer.

Gather Documents

Applying for a loan requires several documents. Before completing your personal loan application, collect all the paperwork you need.

Approaching this step proactively will help you streamline your application process, saving you time. It will also make it easier for your lender to review your eligibility and creditworthiness.

Personal loans usually require similar documents, no matter the lender, though. A few you should include are:

•   Proof of identity such as a driver’s license or passport.

•   Proof of current address such as a current lease agreement, utility bill, or proof of insurance.

•   Verification of stable income and employment such as W-2s, bank statements, paystubs, or tax returns.

Waiting for Approval

Once you submit all the necessary paperwork, the last thing to do is wait. Approval times vary between lenders and may be quick or lengthy depending on how complicated the application is. Some approvals happen within a day, while others may take up to 10 days.

After your lender approves your large personal loan, you’ll receive it in the form of a lump sum. Lenders may deduct any fees, such as origination fees, before disbursing the loan proceeds. A personal loan calculator can help you estimate your loan payments.


💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

What Can You Expect When Repaying Your Loan?

Regular installment payments begin once your large personal loan is approved and you receive the funds. The loan agreement will state the loan terms, interest rate, and what each payment will be, in addition to other details about the loan.

Can You Borrow $100,000 if You Have Bad Credit?

While it might not be impossible, borrowing a large loan with bad credit won’t be easy. Lenders tend to favor low-risk borrowers who are more likely to repay their loans on time and in full. A strong credit history provides some assurance that a borrower will do that. But poor credit or no credit at all may look to lenders like a likelihood to default.

Lenders willing to loan to borrowers with bad credit typically require different data to evaluate their application, however. For example, they might ask the borrower to show a history of utility payments or information from their bank account. Lenders may also limit borrowing amounts and charge higher interest rates to applicants with bad credit.

Additionally, borrowers with poor credit can improve their chances by opting for a secured personal loan, one for which they pledge collateral to guarantee the loan. This may work well for someone who struggles with credit but has assets and sufficient income to make loan payments. If the borrower defaults on the loan, the lender has the right to seize the asset pledged as collateral.

Are There Alternatives to Large Personal Loans?

After some research, you might decide a personal loan isn’t right for you. Or, you may struggle to get the level of financing you want. In that case, there are alternatives to a personal loan. For example, you could consider these choices if you have equity in your home or other real estate:

•   Cash-out refinancing: A cash-out refinance allows you to replace your existing mortgage with a new, larger loan. After the original mortgage is paid off, you can use the difference as you like. This option works best if you have a significant amount of equity built up in your home and have a high credit score.

•   Home equity loan: Like a cash-out refinance, a home equity loan depends on your built-up home equity. However, it is a second, additional, mortgage, rather than one new mortgage. By borrowing against your equity, the loan has collateral behind it, making it a secured loan.

•   Home equity line of credit (HELOC): Like a home equity loan, you use your home equity to access a HELOC. It acts as a line of credit you can tap into when you need it, and you only pay interest when you borrow. This works best for a homeowner who needs smaller amounts of money over a longer-term, rather than just one lump sum.

The Takeaway

A large personal loan is one that is typically in the range of more than $50,000. It can allow you to pay off debts or make significant purchases. However, it may require a high credit score, a solid employment history, and other factors to qualify, and it can bring its own set of pros and cons as well.

Finding the right large personal loan for your financial needs and situation may take some time, but comparing lenders is a good way to get started. Not every lender offers large personal loans. If you are looking for a sizable loan, consider SoFi Personal Loans, which range from $5,000 to $100,000 for eligible applicants.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



Photo credit: iStock/vladans

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Investing in Small Cap Stocks

Investing in Small Cap Stocks

Small cap stocks are stocks in smaller companies, typically those worth between $250 million and $2 billion. Small cap stocks often have high growth potential, which makes them a potentially attractive investment. However, while investors may see higher returns with these stocks, they may also mean higher volatility and risk levels.

For investors considering adding small cap stocks to their portfolios, it’s essential to understand how these stocks work and the advantages and disadvantages that come with this type of investment.

What Are Small Cap Stocks?

With a market cap between $250 million and $2 billion, small cap companies are usually moderately young companies. Small cap stocks typically have some growth potential, but they may not have a longstanding market history. Therefore, these stocks are considered to be riskier than mid-cap stocks or large cap stocks.


💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

Understanding Market Capitalization

Market capitalization, or market cap, is a measure of an individual company’s value. The market cap represents the value of total outstanding shares. Investors can use this value to compare similar companies as well as consider future growth predictions.

To calculate a company’s market cap, multiply the total number of outstanding shares by the current share price. For example, let’s say a company has 15 million outstanding shares at a share price of $25 per share. Using this calculation, the company’s market cap would be $375 million.

Due to share price fluctuations, the market cap fluctuates over time. To find the number of outstanding shares, investors can review the “capital stock” numbers on a company’s balance sheet. This information is updated during the quarterly filings with the Securities and Exchange Commission (SEC).

Are Small Cap Stocks a Good Investment?

Small cap stocks may be a good investment as part of a diversified portfolio, but there are risks. The market cap of a company can give investors an idea of the risk and reward of purchasing individual stocks. Purchasing small cap stocks may be riskier than buying stocks of larger companies because the companies are often still in growth mode. In addition, small cap companies often have fewer resources than large-cap companies, and may have less access to liquidity.

Due to these factors, any market dip can negatively impact small cap stocks. Conversely, smaller companies often have higher upside potential, and small cap growth stocks may deliver higher returns than their peers. Still, investors who choose these investments may have to weather market volatility along the way to growth.

Pros of Investing in Small Cap Stocks

There are several benefits to allocating some of your portfolio into small cap stocks.

Growth Potential

When comparing large cap stocks to small cap stocks, small cap stocks tend to have a higher growth potential over the long-term. For much of the stock market’s history, small cap stocks had higher returns than large-cap stocks, and other asset classes.

This growth potential makes small cap stocks an attractive investment choice for investors. They tend to perform particularly well after recessions, during economic expansion.

They’re Often Undervalued

Analysts usually spend less time analyzing small cap stocks, so they get less attention from investors which can lead to lower demand — and lower prices. Therefore, investors may be able to leverage the inefficiencies of the market for potentially better returns.

Financial Institutions Don’t Increase Stock Prices

Specific regulations may not allow financial institutions such as hedge funds and mutual funds to heavily invest in small cap stocks. Therefore, it’s unlikely that large investments from financial institutions will artificially increase the stock price.

Cons of Investing in Small Cap Stocks

While small cap stocks have their benefits, there are also several drawbacks that investors should consider.

High Risk

Investing in small cap stocks tends to have significant risk for investors. Since they’re often younger companies, small cap companies do not always have a time-tested business model. If the company’s management can not make appropriate adjustments to the business model, it may yield poor financial or operational results.

Also, because small cap companies may lack the resources such as capital or access to financing that larger companies have, they may struggle to expand the business or fill in cash flow gaps, especially if the economy hits hard times.

Research May Be Time-Consuming

Due to the limited availability of research and analysis done on small cap stocks, investors may have to spend a significant amount of time researching each investment option.

Minimal Liquidity

Small cap stocks tend to have less liquidity than large cap company stocks. Since there are fewer shares available, investors may not be able to purchase the stock. Conversely, investors may not be able to sell their shares at a reasonable price. The liquidity of small cap stocks adds to the risk of investing in this type of stock.

How to Invest in Small Cap Stocks

Investors can purchase small cap stocks through a brokerage firm or an individual investment account. Since there’s often less public information available about small cap stocks, investors must do their own due diligence in researching companies to understand their potential risks and returns.

Investors who don’t have the time or expertise to determine which individual small cap stocks to buy can invest in small cap companies by purchasing mutual funds or exchange-traded funds (ETFs) that track a broader range of small cap indexes. Some funds may also have unique characteristics within them, such as growth- or value-oriented stocks.

Buying mutual funds and ETFs allow investors to pool funds with other investors to sell and buy buckets of market securities. This type of investing aims to mitigate risks by diversifying investments. Instead of investing in a single company, fund investors are purchasing shares in dozens or hundreds of companies. Investing in mutual funds and ETFs is more of a passive investment strategy that doesn’t require investors to make trades actively.


💡 Quick Tip: Are self directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Diversifying With Small Cap Stocks

Even though small cap mutual funds and ETFs provide diversification within a specific asset class, investors can further reduce their risk exposure by expanding portfolio diversification into a broader mix of assets.

Depending on market conditions, different types of stocks may perform differently. The concept can apply to stocks of companies that vary in sizes. Depending on what the market is doing, small, medium, and large companies may either beat the market returns or underperform.

When diversifying a portfolio, investors may start by determining their investment goals, risk tolerance, and time horizon. Then, by assessing these factors, they can decide an appropriate asset allocation to determine the portfolio’s percentage that may include stocks. A typical example is a portfolio composed of 60% stocks and 40% bonds.

Investors use the same factors (time horizon, goals, and risk tolerance) to decide the mix of stocks that will go into the portfolio’s stock percentage portion. Then, as market fluctuations happen, allocations of the portfolio will perform inversely.

For instance, as small cap stocks are rising, mid cap stocks may fall. In this case, small cap stock prices’ upward movement can offset the decrease in mid cap stock prices, thus mitigating losses.

The Takeaway

Small cap stocks are shares of companies with market caps ranging from $250 million to $2 billion. Although small cap stocks have the potential for long-term growth, they tend to come with more risk. With this in mind, building a diversified portfolio with a broader range of investments can help minimize your risk exposure.

But, attempting to build an entire portfolio from scratch and keep it balanced can be time-consuming and a risky venture if you’re an average investor. Instead, many investors choose to get small cap exposure by purchasing mutual funds and exchange-traded funds (ETFs), which mimic the returns of indices that track stocks meeting certain criteria.

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.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



Photo credit: iStock/Erikona

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.
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.

Claw Promotion: Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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