Financial Topics Archives

May

2025

10 Tips for Finding Cheap Cruises

By Michael Schreiber | Budgeting & Goals, Financial Independence, money | Comments Off

The high seas, sun, 24/7 dining, and stops at exotic ports of call: What’s not to love about a cruise? Sometimes, the answer is the price. A cruise can be a big-ticket vacation item that’s a challenge to afford.

But for the people who crave an all-inclusive travel experience, there are smart ways to snag a deal. Whether your fantasy is navigating the dramatic Alaskan coastline or floating through the Caribbean’s crystal waters, there are hacks that can help make it a reality.

Read on to learn insider strategies for finding the cheapest ways to cruise.

Key Points

• Book during off or shoulder seasons for cheaper cruise prices.

• Monitor last-minute deals for potential discounts.

• Bundle services and amenities to save money.

• Use credit card rewards to lower costs.

• Set a budget and save in advance.

Buyer Beware

First, a word to the wise: As just about every frugal traveler knows, sometimes deals really are too good to be true…or at least not all they’re cracked up to be. It’s important to read the fine print and be sure of what’s included and not included in cruise deals you may find.

When considering the cheapest way to cruise, you’ll want to think about airfare, meals, excursions, room type and location, and other amenities that can lead to upcharges. That way, you can budget appropriately and make sure you have enough money in your travel fund to ensure you can afford your trip.

You’ll also want to pay close attention to cancellation policies. Many people plan trips far in advance, and situations can change between the time you book and the time you are supposed to board the ship. It can be wise to consider the costs and benefits of trip insurance. Note: Some credit card travel insurance may have you covered; check with your card issuer for details.

Next, the money-saving tips.

1. Read Cruise News

There are countless sites and blogs devoted to the cruise industry, staffed by both insiders and frequent cruise passengers. These sites cover both industry trends as well as specific deals and offers from particular cruise lines. In addition to finding cruise deals, they are great for learning about unique cruise offerings and locales. Some noteworthy sites include CruiseFever, CruiseHive, and CruiseCritic.

2. Search the Travel Sites

CruiseDirect.com, CruisesOnly.com, Cruise.com, and others are searchable databases of cruise offers. They are similar to Expedia, Travelocity, and other general interest travel websites, except they are devoted to cruises. These sites typically have sections focused on cruise deals and may at times have exclusive offers that aren’t available elsewhere.

Cruise lines, like Carnival, Princess, and Royal Caribbean, also typically have their own deals section, which can be worth checking out.

3. Scan Social Media

To find cruise deals on social media, it’s a good idea to follow your favorite cruise lines’ official accounts on platforms like Facebook, X (formerly Twitter), and TikTok. You might also search for the hashtag #cruisedeals and related terms to discover promotions, giveaways, and last-minute sales.

4. Look for Bundles

Both travel websites and cruise lines themselves often encourage passengers to bundle a variety of services and amenities when booking. These cruise bundles can offer real savings. Some of the options that are typically bundled include airfare, meal and drink packages, transport to and from the ship, free WiFi, and more. (About that WiFi: While some cruise lines have free WiFi, others can charge around $20 or more per person per day for this.)

When evaluating these packages, it’s worth taking the time to review each item, what it includes (there are various levels of perks available on ships, after all), whether you really want everything in the bundle, and what it would cost if you were to purchase the items separately.

5. Travel With Friends

If you have a big family and/or lots of friends, or if the idea of going on a cruise with your coworkers isn’t terribly off-putting, you might be able to score a group rate on a cruise. For example, Norwegian Cruise Lines features a group deal that offers bonuses for every five cabins booked. People traveling on group deals may qualify for bonus packages that include food and drinks, excursions, free WiFi, and more.

Recommended: Creating a Travel Fund

6. Book Well in Advance…Or Last Minute

Popular cruises, particularly the more luxurious ones, tend to fill up quickly. And the best rates are usually available when tickets first go on sale, which can be as much as a year or more advance. After tickets begin to sell (often between November and March, when promotions kick in) and the sail date nears, prices typically start to rise. The other benefit of booking early is that you’re more likely to get your choice of cabin and dining options. Early bookers may also get access to other special perks, like free airfare, upgrades, and free drinks.

That said, there are also plenty of stories of people scoring incredible last-minute deals on cruises. As the departure date grows closer, if a ship hasn’t sold out, the cruise line may offer serious incentives in order to fill up those empty rooms.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

7. Sail During Shoulder Season

Determining peak cruising season, when demand is the highest, can be tricky because of all the variables involved. First and foremost (and perhaps most obviously), different parts of the world experience the seasons and corresponding vacations at different times. So peak season in one part of the world may be very different from peak season in another.

Many think that off-peak season, when demand is the lowest, is the best time to find a cruise deal, though that may not always be the case. If a cruise line cuts back on the supply of cruises too much because of seasonal drops in demand, there may not be many deals or even much availability to be found.

That’s why many point to “shoulder season,” the period between the peak and off-peak seasons, as the best time to find deals on cruises. Keep in mind that the weather might not be as great as it is during peak season, but you’re also more likely to avoid crowds both on the boat and on shore excursions. You’ll also want to consider seasonality when looking for the cheapest days to fly to and from your cruise’s point of departure and return.

8. Check for Special Discounts

Factors such as what organizations you’re a member of and where you live can help you save money on your dream cruise, whether that means exploring the Mediterranean or waters around Mexico.

You may find that belonging to a group like AARP can score you a cruise discount. In addition, some credit card issuers offer cruise benefits. There may also be general discounts for seniors, military families, teachers, and even frequent cruisers.

You might also be able to take advantage of resident cruise deals if you live in a particular area. Celebrity Cruises, for example, offers exclusive deals to residents of certain states, while Disney offers Florida residents up to 25% on select Caribbean cruises.

9. Pay in Full

Even if you’ve found a fantastic deal on a cruise, vacations are expensive, so it’s important to consider your financial options. If you don’t have the funds to cover the entire cost of the trip, then you may want to consider waiting until you’ve saved up enough cash to pay in full up front.

Keep in mind that if you put the trip on a credit card and carry that balance over from month to month, you’ll be paying relatively high interest rates, perhaps 20% or higher. That adds to the cost of the trip significantly, even if you’re using a cash back rewards credit card.

Some people opt to use personal loans for vacations, which typically come with lower interest rates than credit cards. But personal loans, though often more affordable than credit cards, aren’t free, and they’ll add to your vacation budget as well.

10. Maintain a Budget

When planning your cruise, it’s important to drill down and really think through the budget. If you don’t have a truly all-inclusive deal, you’ll want to to itemize everything, such as:

• Cruise tickets

• Flights

• Ground transportation

• Food and drinks

• Excursions

• Souvenirs

• On-ship entertainment

• Gambling

• Pictures

• Travel insurance

• Gratuities

• WiFi

• International calls

• Fees for any travel visas

• Currency exchange

There are plenty of great budgeting trackers that can help you monitor spending on vacation and more. But when it comes to vacation planning, it’s best to earmark the money before you’ve spent it, add a cushion of 10% or 20% to cover the unexpected, and then stick to it. You’ll enjoy the vacation more knowing that you’ve got it covered and won’t stress out when it’s over because you’ve spent more than you can afford.

Also don’t forget to see how you might apply your credit card rewards for travel; you might be able to apply cash back or otherwise lower costs this way.

The Takeaway

Taking a cruise doesn’t have to be expensive. If you’re wondering how to get cheap cruise tickets, there are luckily myriad ways you can get cruise discounts, ranging from going during the off or shoulder seasons to bundling your vacation expenses.

The cheapest way to cruise may be to avoid paying with credit cards, personal loans, or other methods that will end up costing you in interest. Instead, consider setting a savings goal based on the expected cost of the cruise then opening a savings account earmarked for the trip. Choosing a bank that pays a competitive rate, and setting up a monthly automated transfer into the account, can help you reach your goal sooner.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

How do you get the cheapest prices on cruises?

To get the cheapest prices on cruises, book during the off-season or “shoulder” season (the period between the peak and off-peak seasons). Look for last-minute deals, but also consider booking well in advance to lock in lower rates. Other tips for finding cheap cruises include: using cruise comparison websites, following your favorite cruise lines on social media, being flexible with your travel dates, and considering less popular destinations.

Do cruises go cheaper closer to departure?

Cruises can go cheaper closer to departure, especially if the ship isn’t fully booked, since many cruise lines will offer last-minute deals to fill remaining cabins. However, prices can also rise if the ship is nearly full. It’s a good idea to monitor prices and be ready to book quickly if you find a good deal. Always check for any restrictions or blackout dates.

How can I pay less for a cruise?

To pay less for a cruise, book early — cruise lines often offer big discounts when you book a year or more in advance. If you are flexible on dates, on the other hand, you may be able to get deals within 30 days of your departure. Cruise lines will often offer deep discounts if a ship hasn’t sold out. Also consider using credit card points or rewards to cover some of the cost, and booking through a travel agent that specializes in cruises (they often have access to lower bulk fares not available to the general public).

Photo credit: iStock/nantonov

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May

2025

Refinancing vs. Paying Off Student Loans Early — Which Saves You More?

By Rebecca Lake | Fresh Out of School, Student Loans, student_loan | Comments Off

If you have student loan debt, chances are you’re looking for ways to save money on your payments. You may be wondering how to pay off student loans faster, for instance. Or you might be thinking about student loan refinancing as a possible option for making loan payments more manageable.

Which method can help you save more? The best strategy for paying off student loans comes down to how much you owe and the specifics of your financial situation. Read on to learn how the different student loan repayment strategies work to help determine which may be the right option for you.

Key Points

• Refinancing student loans can lower loan interest rates and monthly payments for those who qualify.

• Paying off loans early reduces the total amount of interest paid on the loans.

• Student loan refinancing may be appealing to individuals who have good credit and want to change their loan terms.

• Borrowers might opt to pay off their loans early if they’re trying to put money toward other financial goals, such as a down payment on a house.

• Evaluate your financial situation and goals, and evaluate the benefits and drawbacks of refinancing and paying off loans early before making a decision.

Understanding Your Student Loan Repayment Options

Student loan repayment options differ by the type of loan you have. Federal student loan borrowers can choose from the following repayment plans:

• Standard Repayment Plan. On the standard plan, you pay off your loans in fixed monthly payments within 10 years

• Graduated Repayment Plan. With this option, your payments start lower and increase every two years. The payments are designed so that your loans are paid off within 10 years.

• Extended Repayment Plan. On this plan, your payments may be fixed or graduated, and your loan term is up to 25 years.

• Income-Driven Repayment Plans. These plans base your monthly payments on your discretionary income and family size. There are currently three income-driven repayment plans you can choose from: Pay As You Earn (PAYE), Income Contingent Repayment (ICR), and Income-Based Repayment (IBR). If you’re planning to seek student loan forgiveness, the IBR is the only plan currently offering that option.

For borrowers with private student loans, the repayment terms are set by the lender. You may have anywhere from 5 to 20 years to repay your loans, depending on your loan agreement.

How Refinancing Student Loans Works

When you refinance student loans, you replace your existing loans with a new loan from a private lender. Ideally, you may qualify for a loan with a lower interest rate or more favorable loan terms.

Borrowers typically start the refinancing process by shopping around to compare lenders and choose one that offers the best loan terms for their situation. Next, you apply for refinancing and tell the lender which loans you’d like to refinance. Once you’re approved, the lender pays off the old loans, and you make payments on the new loan going forward.

You can refinance private and federal student loans. However, refinancing federal loans makes them ineligible for federal benefits, including income-driven repayment, federal deferment and forbearance periods, and federal student loan forgiveness such as Public Service Loan Forgiveness.

How Paying Off Student Loans Early Works

Paying off student loans early means repaying the full balance you owe before the final repayment date set by the lender.

For example, say you have $20,000 in federal student loans and you’re paying them off on the standard 10-year repayment plan. You can pay your loans off early by using one of these strategies:

• Put extra funds toward the loan. By paying extra on your student loans each month, you can help shrink your debt and reduce the total amount of interest you’ll pay over the life of the loan. Just be sure to specify to your lender or loan servicer that the extra money you’re paying should be applied to the principal.

• Put “found money” toward your loan. Apply your tax refund or a bonus you receive at work to your loan principal to help reduce your balance.

• Round up your monthly payments. If you don’t have a lot of extra funds to put toward your loan payments, start on the smaller side. Instead of paying $346 per month, round up your payment to $350. It might not seem like much, but it adds up over time.

If you have several federal loans and they feel like a lot to keep track of, you could consider consolidating them into one Direct Consolidation Loan to streamline your monthly payments. While consolidation generally won’t save you money, it can make your payments easier to manage.

That’s one difference between student loan consolidation vs. refinancing. The interest rate of a consolidation loan is a weighted average of your previous loan rates, rounded up to the nearest ⅛ of a percent, so the rate is not necessarily lower. With refinancing, you may be able to get a lower interest rate if you qualify, which could help you save money.

Comparing the Costs: Refinance vs. Early Payoff

If you’re considering refinance and early loan payoff, you’re probably asking yourself, does refinancing student loans save money? The answer depends on your new loan terms.

Refinancing student loans could save you money if you get a lower student loan refinancing rate rate and/or choose a shorter repayment term. Paying off your loans early will save you money by reducing the amount of interest you pay over time. To get a sense of which method might help you save more, here’s an example that shows how the two options compare.

Say you owe $30,000 in federal student loans with a rate of 6.53%. You’re enrolled in the Standard 10-year Repayment Plan, with a monthly payment of $341, and you’re debating between two options:6 refinancing to a new private loan with a 10-year term at 5.50%, or keeping the loan you have but increasing your payments to $500 per month. This is how the math works out for each option.

	Refinancing	Early Payoff
New Monthly Payment	$326	$500
Payment Savings or Increase	~$15 per month	+$159 per month
Repayment Term	10 years	6 years and 1 month
Interest Savings	$1,863	$4,520

If you want to be even more aggressive and pay off your loans faster through refinancing by choosing a 5-year term instead, your monthly payments would increase to $573, but you’d save $6,550 in interest, and you’d pay off your loans half the time.

A student loan refinancing calculator can help you estimate your total savings based on different repayment terms, interest rates, and monthly payment amounts.

Factors to Consider Before Choosing Between Refinancing and Paying Off Early

Refinancing student loans vs. paying them off early are two very different strategies, and one may suit your situation better than the other. There are several important factors to weigh before making a decision.

Interest Rates and Loan Terms

If you’re exploring student loan refinance, compare loan rates and terms from different lenders to estimate your potential savings. Many private student lenders allow you to check your rates online without any impact on your credit score.

Here are some general rules to remember:

• A shorter loan term usually means a higher monthly payment, but a faster payoff overall.

• A longer loan term reduces monthly payments but increases the total interest paid over time.

An ideal combination to maximize savings is a refinance loan with a low rate and a shorter term, if you can qualify. Your monthly payments will be bigger, but you’ll pay less interest in total.

Recommended: A Guide to Refinancing Student Loans

Monthly Budget and Cash Flow Considerations

Paying off student loans early and refinancing can both affect your budget if your new payments are higher than they were previously. A review of your budget can give you an idea of how much of an increase you might be able to afford with either strategy.

Don’t forget to factor in the unexpected. For example, would you be able to keep up with the new loan payments if you lose your job or your roof starts leaking and needs immediate repairs?

A healthy emergency fund can act as a buffer against those types of situations, but even then your savings may eventually run out. While you can choose to stop putting extra cash toward paying off your loans early at any point, with a refinanced student loan, you have payment due dates to meet. Refinancing makes sense if your payments are affordable not just right now, but for the entirety of the loan term.

Credit Score Impact

Applying for student loan refinancing can affect your credit, since lenders will generally do a hard pull of your credit reports and score. Hard inquiries factor into your credit score calculations.

Your score will usually drop a few points temporarily, though you can typically strengthen it again by making on-time loan and other bill payments. Still, you may want to consider the potential credit score impact if you’re planning to apply for a mortgage or another type of credit in the near future.

Pros and Cons of Refinancing vs. Paying Off Early

Student loan refinancing and paying off your loans early each have their advantages and disadvantages. Here’s a breakdown of the pros and cons of both methods to help you weigh the options.

Pros and Cons of Refinancing Student Loans

Student loan refinancing may be appropriate for individuals who have good credit (or a loan cosigner with strong credit) and want to change their loan terms.

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Pros:

• Refinancing student loans might lower your interest rate.

• Choosing a shorter refinance term can help you pay off loans faster and potentially save more money.

• Private lenders may offer interest rate discounts to help maximize savings. For instance, if you choose the autopay option for your monthly payments, you might save 0.25% on your interest rate, depending on the lender.

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Cons:

• You’ll need good credit or a cosigner with good credit to qualify for the lowest rates.

• Refinancing to a longer loan term can lower your payments but increase your overall cost.

• You’ll lose valuable federal benefits and protections if you refinance federal student loans.

Pros and Cons of Paying Off Student Loans Early

You might opt to pay off your loans early if you’re trying to put money toward other goals, such as a down payment on a house or saving for retirement.

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Pros:

• If you have federal student loans, you can maintain access to federal benefits, should you need them.

• You won’t have to undergo a credit check.

• Your total savings could be more with an early payoff vs. student loan refinancing, depending how much additional money you put toward your monthly payments.

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Cons:

• You’ll need to be disciplined and watch your spending to make your early payoff plan work.

• The interest rate on your student loan will remain the same.

• Any extra money you have will likely need to be directed toward your payoff goal, which means you might have to postpone other expenses such as vacations or eating out.

The Takeaway

Student loan refinancing could give you the chance to get more favorable loan terms, including a lower interest rate, if you qualify, which could save you money. An early student loan payoff plan could potentially yield serious savings on interest if you’re dedicated to following through.

While both options have their merits, the best strategy for paying off student loans is the one that fits your financial situation and goals.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Should I refinance or pay off student loans if I have extra cash?

Which method is a better choice depends on your specific situation. A few things to think about: If you have enough cash to pay off student loans early, that could result in substantial savings on interest. However, if an emergency happens and you’ve used your savings, you could end up in a tough spot unless you have an emergency fund. Refinancing may save you money over time if you’re able to get a lower interest rate, and you likely won’t have to deplete your savings.

Does refinancing student loans save more money than early payoff?

Whether refinancing student loans saves more than an early payoff depends on the loan’s refinance terms. You may save more with refinancing if you get a lower interest rate and a shorter loan term. However, your monthly payments will be higher. Do the math to compare what you could save with each option to help decide which is right for you.

How does refinancing affect my credit score?

Applying for a refinance loan typically triggers a hard credit pull, which can show up on your credit reports. Hard inquiries can temporarily drop your score a few points, but you can usually rebuild your credit over time as you pay down your new loan and make all your other payments on time.

Is it better to pay off student loans early if I plan to buy a home?

Paying off student loans early means you’ll have one less debt payment to make, which is a plus if you’re preparing to take on a mortgage. Just be sure to consider how paying loans off fits with saving money for a down payment to help decide if you can afford to do both.

Can I refinance my student loans multiple times to maximize savings?

You can generally refinance student loans as many times as you want. Whether that strategy saves you money depends on the terms you get each time you refinance. If your financial situation improves — say you build your credit and think you can get a lower interest rate — it may make sense to consider refinancing then, for example.

Photo credit: iStock/Prostock-Studio

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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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.

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.

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

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 .

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.

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May

2025

Pros & Cons of Sector Investing

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

Sector investing simply refers to targeted investing in a particular market sector or industry. Finance, real estate, utilities, and retail are a few examples of common sectors.

Many institutional investors use a sector investing strategy, but it’s one that individual investors can use as well, either by selecting individual stocks according to a theme or to describe different exchange-traded funds (ETFs) or mutual funds that focus their investments on a single sector.

Key Points

• Sector investing focuses on specific market segments, allowing targeted exposure.

• ETFs provide an accessible way to invest in sectors, enhancing portfolio diversification.

• Diversification within sectors can help mitigate risks, balancing potential losses and gains.

• Sector investing may involve significant volatility and concentration risk, impacting returns.

• Sector rotation strategies align investments with economic cycles, optimizing performance.

Common Investing Sectors

Investors who want exposure to the following sectors can either invest directly in companies or assets, or invest in ETFs or mutual funds composed of securities within that sectors.

Health Care

This section focuses on companies that contribute to health care needs and related endeavors. These may include hospitals and related real estate, health insurance companies, pharmaceutical companies, companies that make medical devices, and more.

Precious Metals

The precious metals sector is historically seen as a relatively safe haven asset that investors tend to flock to in times of crisis. Even outside of a crisis, companies involved in the exploration of new metal deposits and mining of those deposits can sometimes provide significant returns.

Investors may be keen to find ways to invest in gold, but other examples include mining companies, direct investments in commodities, or in funds or ETFs that hold them.

Real Estate

This sector includes real estate developers and property owners, as well as mortgage-backed securities.

Real estate investors may also choose to put money into real estate investment trusts (REITs), which use investor money to acquire income-producing properties like data centers, office builds, shopping malls, or apartment buildings. One attractive feature of REITs is that they pay out a large portion of their income in the form of dividends to investors.

Utilities

Utility investing focuses on companies that provide utilities like phone and internet service, electricity, or natural gas. Utilities are considered to be a defensive sector, since they tend to do well during a recession because people almost always need the services they provide.

Tech

Technology companies have become an increasingly large part of the economy as more organizations continue to undergo digital transformation. Investments in the tech sector might include streaming video providers, computer companies, or social media companies.

Consumer Staples

This sector focuses on the companies that make or sell items that people need to buy, such as supermarkets, food producers, and convenience stores.

Consumer Discretionary

This sector includes companies that make or sell goods that people like to purchase but don’t need, such as e-commerce companies, home improvement, apparel, or sporting goods retailers. This sector tends to perform well during times of economic expansion and to lag during a recession.

Energy

This sector focuses on companies that produce or supply energy. That may include oil drillers, coal miners, and pipeline operators. Some energy investors might focus only on stocks in the renewable energy space, such as wind farms or solar panel producers.

Pros of Sector Investing

Some of the benefits involved in sector investing include diversification and the ability to invest with market cycles.

Diversification

Investing in multiple sectors of the economy is one method of attaining diversification within a portfolio, which involves investing in many different types of stocks. If some sectors produce outsize gains, they can help offset lower returns in other sectors.

Rotation Strategy

One of the more common sector investing strategies is sector rotation, meaning that investors change their allocation to certain sectors depending on the economic cycle. For example, they might invest more heavily in the utility sector during a recession, when utilities tend to outperform, and move those funds into consumer discretionary goods during a recovery.

Cons of Sector Investing

While sector investing may prove beneficial, it also has its potential drawbacks. Some of the same features that make this strategy profitable or appealing can also make it risky.

Potential Volatility

Things that impact one sector as a whole tend to affect most or all companies within that sector. As a result, a single relevant event or news headline could have dramatic consequences for those heavily invested. This could result in large moves upward or downward.

For example, imagine being heavily invested in the oil and natural gas sector. Suddenly, the demand for energy plummets because of restrictions on travel, decreased consumer spending, and overall lack of demand for petroleum products. This would likely have a dramatic effect on nearly all companies in the oil and gas sector, leading to potentially large losses for investors with a large exposure to this sector.

On the other hand, if markets became optimistic that a future event would restore demand, or something happened to decrease supply, then volatility could swing the other way pushing up the value of investments.

Concentration risk

Concentration risk is a form of investment risk in which investors over-allocate a portion of their portfolio to a single sector and lose the downside protection that may come with a properly diversified portfolio, which spreads investments across different types of assets to minimize risk.

It is notoriously difficult for individual investors to sustainably engage in stock market timing, in which they can precisely determine the most optimal time to buy and sell a specific investment.

Sector ETF Investing

Investing in sector-focused ETFs is one of the easiest and most common ways to invest in sectors. Sector-specific exchange-traded funds hold dozens or hundreds of stocks within a specific sector, allowing investors to get exposure to the entire sector without having to make investments in individual companies.

Choosing an ETF takes less time and research than choosing many individual stocks. While ETFs may not experience the same level of gains as individual stocks, they also have less volatility.

The Takeaway

Sector investing involves making investments in specific parts, segments, or sectors of the economy. There can be pros and cons to doing so, and investors should consider all factors or even speak with a financial professional before making a decision.

To determine the best investing strategy for you, you’ll need to consider your long-term goals, your risk tolerance, financial objectives, and the amount of time and effort you want to spend choosing investments.

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 sector investing?

Sector investing refers to targeted investing in a particular market sector or industry, and can be utilized as a strategy incorporating stocks, funds, or other assets.

What are common sectors that investors invest in?

Some common sectors or industries that sector investors invest in include finance, real estate, utilities, and retail, among many others.

What are the risks of sector investing?

A couple of common risks associated with sector investing include concentration risk, and risks associated with increased volatility within specific sectors.

Photo credit: iStock/diego_cervo

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.

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SOIN-Q225-054

May

2025

What to Know About a Market Sell-Off

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

A market sell-off occurs when a large pool of investors decides to sell stocks. When they do this, stock prices fall as a result. A market sell-off may be due to external events, such as public health emergencies or natural disasters. But sometimes, sell-offs can be triggered by earnings reports that failed expectations, technological disruption, or internal shifts within an industry.

During a market sell-off, stock prices tumble. That stock volatility might lead other investors to wonder whether they should sell as well, whether they should hold their current investments, or whether they should buy while stock prices are low. There are a lot of things to consider.

Key Points

• A market sell-off occurs when a large group of investors sells stocks, causing prices to drop.

• Causes of sell-offs may include external events, industry changes, and corporate news.

• Timing the market can be difficult to do, often requiring luck as well as deep industry knowledge.

• Risk tolerance can influence how investors handle market sell-offs.

• Diversification helps protect a portfolio from market volatility.

Understanding Bull Markets vs Bear Markets

Understanding the overall stock market environment can help investors understand how sell-offs exist within the market.

It’s not uncommon to see references to a bull market and a bear market. A bull market is when the stock market is showing gains. Some suggest that a 20% (or higher) rise in the broader market index over a period of two months or more indicates a bull market, but the phrase is commonly used when stocks are “charging ahead,” and is generally considered a good thing for investors.

A bear market, on the other hand, is typically used to describe situations when major indexes fall 20% or more from their recent peak, and remain there for at least two months.

There are also “corrections.” This is when the market falls 10% or more from a recent stock market high. Market corrections are called such because historically, they “correct” prices to a longer-term trend, rather than hold them at a high that’s not sustainable. Sometimes, corrections turn into a bear market. Other times, corrections reach a low and then begin to climb back to a more level price, avoiding a bear market.

What to Do During a Market Sell-Off

A sell-off can make news, and can make investors feel on-edge. After all, investors don’t want to lose money and some investors fear that a sell-off portends more bad news, like a bear market.

Other investors see sell-offs as an opportunity tobuy stocks at lower prices before the market bounces back. But a sell-off or correction may not trigger a dramatic change in every investor’s portfolio. That’s because a sell-off or correction may be limited to a certain market sector or group of stocks, such as if a tariff impacted select companies.

So, what should an investor do during a market sell-off? That depends on the goals of an investor. Market sell-offs are “normal” fluctuations of the market, and investors who have a diversified portfolio may not do anything. Others may choose to either buy or sell, and neither decision is one-size-fits-all.

Pros & Cons of Selling During a Sell-Off

Some investors may get spooked and sell stocks in fear that the market will slide further. But while taking money out of the market may give investors confidence and cash in their pockets, removing money from the market might make it hard for investors to decide when to re-invest in the market in the future. As a result, they may miss opportunities to take advantage of compounding returns in investments.

Pros & Cons of Buying During a Sell-Off

Other investors may see a sell-off as an opportunity to invest when the market is down. They might buy stocks at a lower price, then wait for the market to bounce back. But a market sell-off may not necessarily be the optimum time to buy stocks, especially if it’s unclear what’s driving the sell-off.

Many investors pride themselves on their perceived ability to “time the market,” or buy stocks right before they begin to rise again. But the truth is that attempting to “time the market” often relies on luck, deep knowledge of the industry, timing, or a combination of all three, and it can easily backfire

For many investors, the best way to “time” the market may be to invest when they can afford to do so in a diversified portfolio, and allow their money to ride out the highs and lows of market movements.

Why Risk Tolerance Matters During Market Sell-Offs

Understanding your own risk tolerance and investment goals can help an investor decide how to handle a market sell-off. Risk tolerance is the amount of risk an investor is willing to take, and depends on several factors.

• Risk capacity. This is your ability to handle a risk. For example, people who are depending on their investment portfolio to fund their lives, such as retirees, may have a lower risk tolerance than young people who have years for their portfolio to make up losses.

• Benchmarks. Are there benchmarks their portfolio has to hit at set periods of time so that their portfolio reaches the goals they have set?

• Emotional tolerance. All investors have different emotional capacity for risk tolerance that may be independent from the actual amount of money within the portfolio.

Understanding your personal risk tolerance can help you build an investment portfolio that may be less vulnerable to market sell-offs and can also give you less trepidation during a sell-off.

💡 Quick Tip: When people talk about investment risk, they mean the risk of losing money. Some investments are higher risk, some are lower. Be sure to bear this in mind when investing online.

How Diversification Can Help Protect a Portfolio From Sell-Offs

A portfolio diversification strategy may be different between investors, but the underlying logic of any diversification strategy is that they shouldn’t put all of their eggs in one basket. Since it’s not unusual for a sell-off to affect only parts of the market, a diverse portfolio may be able to better ride out a market sell-off than a portfolio that is particularly weighted toward one sector, industry, or exchange.

Some investors may diversify with a range of assets in their portfolio. Others may diversify their portfolio with a range of domestic and international stocks. And others may see diversification as a way to invest beyond the market, such as investing directly in real estate, art, or other different types of alternative investments that are independent of market movement.

Another way some investors ensure diversification within their portfolio is to focus the majority of their portfolio on exchange-traded funds (ETFs) and mutual funds, instead of individual stocks. ETFs and mutual funds can contain hundreds or even thousands of securities across asset classes, which can potentially make the fund less vulnerable to market dips.

Protecting a Portfolio From Sell-Offs

In addition to building a portfolio that’s less vulnerable to market volatility, investors have several options to further protect their portfolio. These preventative investment measures can remove emotion during a market dip or sell-off, so that an investor knows that there are stopgaps and safeguards for their portfolio.

Stop Losses

This is an automatic trade order that investors can set up so that shares of a certain stock are automatically traded or sold when they hit a price predetermined by an investor. This can protect an investment for an individual stock or for an overall market drop. There are several stop loss order variants, including a hard stop (the trade will execute when the stock reaches a set price) and a trailing stop (the price to trade changes as the price of the stock increases).

Put Options

Put options are another type of order that allow investors to sell at a set price during a certain time frame; “holding” the price if the stock drops lower and allowing the investor to sell at the higher price even if the stock drops further.

Limit Orders

Investors can also set limit orders. These allow an investor to choose the price and number of shares they wish to buy of a certain stock. The trade will only execute if the stock hits the set price. This allows investors freedom from tracking numbers as price points shift.

The Takeaway

A market sell-off is triggered when a large group of investors sell their stocks at once, causing stock prices to drop. A sell-off can be caused by world events, industry changes, or even corporate news.

There is no single smart way to react to a sell-off. Different investors will gravitate toward different strategies. But by researching companies and setting up a portfolio based on risk tolerance, an investor can feel confident that their portfolio can withstand market volatility.

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

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

SOIN-Q225-033

May

2025

The Basics of Electronic Trading

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

Electronic trading refers to the process of conducting trades in financial markets through an online broker-dealer using the internet. These trades can take place in the stock, bond, options, futures, or foreign exchange (FOREX) markets. Electronic trades can only be conducted during standard market hours: between 9:30 am and 4 pm Eastern Standard Time on weekdays. Traders can create orders after markets close, but the orders won’t be executed until the next trading day.

This represents a big change from the way the stock exchange worked prior to the internet, when traders would gather in one central place like The New York Stock Exchange (NYSE) and buy and sell stocks in person. With advances in digital technology, that’s no longer necessary, and the age of electronic trades now dominates.

Key Points

• Electronic trading enhances convenience and reduces costs, allowing easy access to financial markets.

• Investors should consider platform features, fees, and alignment with investment goals.

• Market, limit, and stop-loss orders help manage investments effectively.

• Tax implications include capital gains and losses from trading activities.

• Risks involve lack of guidance, quick market changes that investors are unable to keep up with, and accumulating fees.

How to Start Electronic Trading

Many investors today will only ever engage in online stock trading. Traders no longer need a personal broker whom they have to call on the phone each time they want to buy or sell a security.

Instead, investors can now open an online brokerage, create an account, and start placing trades. But choosing a platform is only step one in electronic stock trading. After that, you’ll need to decide what stocks to trade, what type of orders to use, what expenses will be involved (if any), and how trading might affect your tax liability.

Choose an Electronic Trading Platform

There are many electronic trading platforms to choose from. They are all similar in many ways, with general ease of use: Signing up and getting started can take less than an hour, with perhaps a few days of wait time involved for identity or “know your customer” verification.

Among the various platforms, there are slightly different features or different options as far as the user experience is concerned. Not too long ago, most platforms charged a commission fee for each buy or sell order executed, and there was a minimum amount of money needed to create a new account.

Recently, many brokerages have eliminated trading fees, and few still require account minimums, although there may be other costs associated with your investments. It’s important to understand what you’re being charged, because even small amounts add up over time and can reduce investment returns.

Research Stocks or ETFs

There are thousands upon thousands of securities to choose from, and many different types of markets and exchanges. When first starting out, it’s easy to get overwhelmed by all the choices.

Thankfully, online brokerages offer tools to help investors get started. There is also an abundance of free information online about investing. There are numerous sources that provide news and analysis on a daily basis to help investors learn and stay informed about new market opportunities.

Recommended: Investing Guide 101

Determine Which Type of Order to Use

It might be common to assume there are only two types of orders: a buy order and a sell order. In actuality, there are many different types of orders.

The type of order that likely comes to mind for most new investors is known as a market order. This is simply an order to buy or sell a security at whatever price it’s trading at right now.

Another type of buy order is a limit order. This is an order to buy at or below a specific price. The order can remain on the books for a day, sixty days, or until canceled, and will be filled whenever the security falls to the specified price.

This can help investors wait to buy a security at a cheaper price without having to monitor things. Limit orders also help protect against sudden spikes in price. If a market order is used just before a large price increase, an investor could pay more for a security than expected.

A stop-loss order can help traders limit losses. Like a limit order, a stop-loss gets triggered when a security falls to a specific price. But as you might have guessed, unlike a limit buy order, a stop-loss order will initiate a sell when triggered.

Consider Tax Implications

Buying securities usually doesn’t invoke any tax liability. But selling does generate a taxable event. Selling at a gain often requires an investor to pay capital gains tax, while selling at a loss could result in a capital loss, which investors can sometimes use to reduce their taxable income.

The subject of taxes and investing is long and involved. New investors might want to consider researching the tax implications of buying and selling securities on their own and consult with a tax professional.

The Risks of Online Trading

In addition to the convenience that electronic trading offers investors, it does come with some risks. The main caveat of online trading is that it gives investors the opportunity to try new strategies (like options trading) or explore new types of investments without the benefit of expert guidance.

All investments come with the risk of loss, meaning you can lose all the money you’ve invested, or more, in some cases. It’s important to balance the opportunities with the downsides when electing to explore new investments.

The Takeaway

The era of online or electronic trading is here to stay, thanks to its lower cost structure as well as the overall convenience and ease-of-use that online platforms provide for investors. Now investors can set up and manage a wide range of portfolios — from day trading to retirement — right from their own computers.

Electronic trading does have its limitations, though. Things move quickly, fees can add up, and sometimes there are investment options available that require more time and expertise, which may not be available through an online platform.

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

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

SOIN-Q225-034