Financial Topics Archives | Page 35 of 822

Mar

2025

Explaining the Shareholder Voting Process

By Rebecca Lake | Growing Wealth, Investing | No Comments

Shareholder voting rights allow certain stockholders to vote on issues impacting company performance, including mergers and acquisitions, dividend payouts, new securities, and who is elected to the board of directors. Investors who own shares of common stock of a company usually have shareholder voting rights. Investors with common stock are generally allowed one vote per share they own. Thus, an investor who owns 1,000 shares of stock may have 1,000 votes to cast.

If the idea of potentially participating in a company’s decision-making process is appealing to you, keep reading to learn more about the voting rights of equity shareholders and how they work.

Key Points

• Shareholder voting rights enable stockholders to participate in key decisions affecting company performance, such as electing directors and approving mergers.

• Common stockholders typically receive one vote per share owned, while preferred stockholders usually do not have voting rights but have priority for dividends.

• Voting processes vary; shareholders can vote in person, by mail, via phone, or online, depending on company policies and ownership type.

• Proxy voting allows shareholders to authorize someone else to vote on their behalf, often necessary for those unable to attend meetings.

• The record date determines eligibility to vote at the annual meeting, and companies must notify shareholders in advance about meeting details and voting issues.

What Are Stockholder Voting Rights?

Stockholder voting rights are the privileges granted to shareholders of a company to vote on matters that affect the company, such as the election of directors and the approval of major corporate actions, and to have a say in how the company is run.

First, it helps to distinguish between common and preferred stock. As noted above, investors who own shares of common stock are typically granted voting rights, usually at one vote per share.

Meanwhile, investors with preferred stock generally can’t vote on matters relating to the company’s governance and policies, but these investors are given preferred treatment in terms of dividend payouts. In the case of bankruptcy, preferred shareholders are usually paid before common stockholders.

There’s another wrinkle when understanding the voting rights of equity shareholders. In a privately held company, the corporation itself (along with state corporation laws) oversees and can restrict shareholder voting rights. In a publicly traded company, shareholder voting follows company rules but must also adhere to the Securities and Exchange Commission (SEC) guidelines.

And while investors who own common stock generally have shareholder voting rights, only “investors of record” are allowed to vote at the annual company meeting. “Of record” status refers to the process whereby investors are added to company records, which isn’t determined simply by which type of shares they own but by when they bought the shares. Investors must buy their shares before the record date to be added to the company record before a meeting — and thereby allowed to vote.

What Do Shareholders Vote On?

Shareholders vote on matters such as the election of the board of directors, the approval of significant corporate actions, like mergers and acquisitions, and the adoption of changes to the company’s bylaws.

The voting rights of equity shareholders don’t extend to issues concerning day-to-day operations or management issues, like hiring and firing, budget allocation, product development, etc. The management team of a company makes these decisions throughout the year.

Nonetheless, the issues shareholders vote on can significantly impact a company’s bottom line, strategy, and overall profitability.

Given the one vote per share rule, the more shares an investor owns, the more influence they can exert if they actively exercise their voting rights — which is why many large investors pay close attention to critical issues where their vote might make a difference. Many shareholder activists use the voting process to exert influence over their investments.

Shareholders are generally alerted to the annual meeting via mail, including a package that summarizes the main issues to be addressed at the company meeting. These can include topics like:

• Electing directors to the board

• Approving a merger or acquisition

• Approving a stock compensation plan

• Executive salaries and benefits

• Major shifts in company goals

• Fundamental corporate structure changes

• Approving stock splits

• Dividend payments

As you’re considering which stocks to invest in, you may want to look into how shareholder voting works with each company. For instance, some companies don’t allow shareholders to call special meetings, and a supermajority vote is required to change some of the company’s bylaws.

What Happens at a Shareholder Meeting?

If you choose to attend the annual general meeting of a company in which you own stock, this is typically the only time that the company directors and shareholders will interact.

In certain states, public and private companies hold annual meetings, but the rules about holding these meetings are stricter for public companies. The agenda will probably be similar to the following:

Notice of Meeting

The voting rights of equity shareholders allow those investors to get advance notice of what will be covered at the annual meeting. Each company has specific rules about how far in advance they must notify shareholders of the meeting, but in most cases, the company sends physical mailers with pertinent information.

The company must also file a statement with the SEC outlining the date, time, and location of the next meeting. This statement will also include the topics to be discussed and voted on at the meeting.

Minutes of the Previous Meeting

Notes from what happened at the previous general meeting are presented and approved.

Presentation of Financial Statements

The company will present current financial statements to the shareholders.

Ratification of Director Actions

Decisions made by the board of directors over the previous year are presented and approved or denied by the shareholders. This can include the payment of dividends according to a set dividend payment schedule.

Speeches

Certain companies will present an overall vision of the company’s goals for the upcoming year or other information relevant to shareholders.

Open Floor for Shareholder Questions

Typically there will be a time when shareholders are allowed to ask questions.

Election of the Board of Directors and Other Votes

Shareholders vote on who will be members of the company’s board of directors for the upcoming year. Voting on other issues will also take place.

Extraordinary Matters

If a special meeting is called during the year, which is different from the annual general meeting, other topics will be discussed and voted on. These could include the removal of an executive, an urgent legal matter, or another issue that requires immediate attention.

How Does the Voting Process Work?

There are a few different ways you can exercise your shareholder voting rights. These differ depending on the company and what type of owner you are. As mentioned, certain companies may give shareholders one vote per share of stock they own, while others give each shareholder one vote in total.

If you get one vote per share, this means you have a larger say in decision-making at the corporate level if you are more heavily invested in the company.

However, for voting to commence, the meeting must have a quorum. Reaching a quorum refers to the minimum number of shareholders that must be present or represented at a shareholder meeting for the meeting to be valid and for votes to be counted. Usually, this is a simple majority of share votes.

Registered owners hold shares directly with the company, while beneficial owners hold shares indirectly through a bank or broker. Most U.S. investors are beneficial owners. As either type of owner, you should receive instructions on how to vote in each of the following ways:

In Person

Companies typically hold annual meetings that shareholders are allowed to attend. They can also hold special meetings throughout the year.

Shareholders receive materials in the mail or via e-mail containing details of upcoming meetings. Most companies hold their annual meetings between March and June, within six months after the close of the previous fiscal year.

By Mail

You can exercise your stock voting rights by mail if you are a registered owner. You will receive instructions on filling out a proxy card so that a delegate can vote on your behalf. You will receive a voting instruction form if you are a beneficial owner.

By Phone

The materials you receive in the mail might include a phone number and directions to vote over the phone.

Over the Internet

Some companies are now providing instructions for shareholders to vote online. This can be a more convenient way to complete shareholder voting.

What Are Proxy Requirements?

Many shareholders live too far away and are too busy to attend company meetings and vote in person. For this reason, shareholders may vote by proxy, meaning they authorize someone to vote on their behalf.

You may be familiar with the estate planning term “health care proxy” or “financial proxy” — a designation allowing an agent to make decisions on behalf of someone else. It’s similar in that a formal power of attorney or other permission must be granted to allow a proxy vote.

As a shareholder, you will receive a proxy ballot in the mail containing information about the issues on which you can vote.

The proxy statement also may include information about the company’s management and the qualifications of any potential board members, the agenda for the meeting, and the company’s largest shareholders. These statements are filed with the SEC annually before the general meeting.

If you own stocks through a mutual fund, the investment managers can also cast proxy votes on your behalf.

The proxy voter is often someone on the company’s management team. Even if you choose to vote by proxy, there are some issues you can still directly vote for or against, such as the election of directors and the chief executive officer’s salary.

How Do You Know When to Vote?

Part of understanding how the voting rights of equity shareholders work hinges on knowing when you can vote. If a company is preparing to hold a vote, it sets what is known as a “record date.” As noted above, if you own shares of that company on the record date, you have a right to vote. The company will send all eligible voters one of the following three notices:

• A physical notice stating that proxy materials are available for viewing online,

• A package containing a voting instruction form or proxy card, as well as an annual report, or

• A package containing an information statement and annual report but no proxy card.

When deciding whether to invest in a stock, you may want to look for any news regarding previous shareholder meetings. You can find out more about what shareholders have voted on in the past and how shareholder voting works with that company to make the best choices about how you might decide to cast your votes.

The Takeaway

The voting rights of equity shareholders can be summed up pretty simply: Investors of record who own shares of common stock are generally entitled to one vote per share, which they can cast at the annual shareholder meeting to shape company policy — and potentially profitability.

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FAQ

Which type of stock comes with voting rights?

Most publicly traded companies issue two types of stock: common stock and preferred stock. Common stock typically comes with voting rights, while preferred stock does not.

What is the difference between registered and beneficial owners when voting on corporate matters?

A registered owner is a person or entity whose name is recorded on the company’s books as the owner of a particular share of stock. This person or entity has the right to vote on corporate matters and to receive dividends and other distributions from the company. On the other hand, a beneficial owner is a person or entity that ultimately owns or controls the stock, even though their name may not be recorded on the company’s books. Beneficial owners may have acquired their ownership interest in the stock through a brokerage account or a trust, for example.

How do shareholders vote for the board of directors?

Shareholders typically vote for the board of directors at the annual meeting of shareholders. In most cases, shareholders can vote in person at the meeting or by proxy, which allows them to appoint someone else to vote on their behalf. Some companies may also allow shareholders to vote by mail or online.

What is the impact of voting rights?

Voting rights are an important aspect of ownership in a publicly traded company. As a shareholder, your voting rights give you the ability to influence the company’s direction and hold its management accountable.

What is e-voting in shares?

E-voting, or electronic voting, is a process that allows shareholders to cast their votes electronically rather than in person or by mail. E-voting is usually done through an online platform provided by the company or a third-party service provider.

About the author

Rebecca Lake

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

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Mar

2025

Setting Up a Retirement Account for Your Child

By Rebecca Lake | invest, Investing, Preparing for Retirement | Comments Off

Opening a tax-advantaged individual retirement account (IRA) for minors becomes possible once they start earning income. Even babysitting or lawn-mowing money counts.

A custodial IRA offers certain advantages: It can jump start a child’s interest in investing, and possibly help build their future nest egg. But there are annual contribution limits and other potential drawbacks to consider, such as the child’s eligibility for college financial aid.

🛈 Currently, SoFi does not offer custodial banking or investment products.

How to Open a Retirement Account for Your Child

Opening a retirement fund for a child means opening a custodial IRA. Generally speaking, a custodial account is one that’s owned by an adult — a parent, grandparent, or legal guardian — on behalf of a minor.

The adult does the investment planning for their child, and manages the money in the account until the child reaches the age of majority (it varies by state). At that point, all the money in the account belongs to the child.

Steps to Opening a Retirement Account for a Child

Here’s how opening a retirement account for minors typically works.

Step 1: Choose a Brokerage

Custodial IRAs are offered by many brokerages, so you’ll need to choose where to open yours. This could be the brokerage where you currently have your investment accounts or a different one.

When deciding on a custodial IRA, consider the range of investments offered, the fees you’re likely to pay, and how easy it is overall to open and manage new accounts. For example, some brokerages let you set up an IRA for a child online, while others require you to fill out and mail in the necessary paperwork.

Step 2: Complete the Application

On the application for a custodial IRA, the brokerage will typically ask for specific information, including:

• Contact information (e.g., your phone number, email address, and mailing address)

• Personal information about yourself, including your name, date of birth, and Social Security number

• Personal information about your minor child, including their name, date of birth, and Social Security number

• Employment information, if applicable

You’ll also need to share routing information and the account number for the bank account you plan to use to make contributions. If you’re moving money from another brokerage firm, you’ll be asked to provide the account number and type.

Step 3: Choose an IRA Type

Should you choose a traditional or a Roth IRA for your child? Both offer tax benefits and both have the same annual contribution limits for kids. For minors, a Roth IRA typically works better. One reason is that the child’s tax rate is typically quite low, and likely much lower than their tax rate will be upon retirement.

Step 4: Fund the Account and Choose Investments

Once you’ve opened a retirement account for a child, you can fund the account using your linked bank account and then make your investment selections. As the custodian, you choose how the money in the IRA is invested, though you might want to talk to your kids first to get their feedback. Generally, custodial IRAs can offer the same investment selections as IRAs for adults, which can mean stocks, mutual funds, exchange-traded funds (ETFs), bonds and other securities.

Different Types of IRAs for Children

As mentioned earlier, there are two main types of IRAs you can open for a minor child: traditional and Roth. The main difference lies in their tax treatment. The IRS regulates contributions to and withdrawals from each type of IRA.

Traditional IRA

A traditional IRA is funded with pre-tax dollars. The IRS allows eligible taxpayers to claim a deduction for contributions. When you take money out in retirement, you pay taxes on the earnings.

Traditional IRAs can make sense for people who can benefit from tax-deductible contributions. That might be less valuable to your child than the tax benefits that a Roth IRA could yield.

Roth IRA

You start a Roth IRA using after-tax dollars, so you get no tax deductions on your contributions. But they can offer something else: tax-free qualified distributions. This means no matter what tax bracket your child is in when they retire, they can withdraw their money from a Roth IRA tax-free.

Roth IRA withdrawal rules also allow contributions to be withdrawn at any time, tax- and penalty-free.

Funding a Child’s Retirement Account

Both traditional and Roth IRAs have annual contribution limits, and you have to contribute earned income. For tax year 2024 and 2025, the annual contribution limit for traditional and Roth IRAs is $7,000.

The same rules apply to custodial IRAs. In tax year 2024 and 2025, kids can contribute an amount equal to their earnings for the year or the $7,000 annual limit, whichever is lower. So if your child makes $5,000 by babysitting and mowing lawns in a year, the most they’d be able to add to their IRA is $5,000.

Again, it’s important to remember that kids need to have income (specifically, taxable compensation) to open and contribute to a traditional or Roth IRA. According to the IRS, that includes:

• Wages

• Salaries

• Commissions

• Tips

• Bonuses

• Net income from self-employment

Investment income, including interest and dividend income, doesn’t count as income that can be contributed to the child’s IRA, under IRS guidelines.

Can a Parent Contribute to a Child’s IRA?

A parent can contribute to a child’s IRA only if that child has earned income of their own for the year.

Again, contributions to a child’s IRA must not exceed their allowed limit for the year. Going back to the previous example, in which your child earned $5,000, they could technically put all of that money into their IRA. Or you could offer to split the difference and let them put in $2,500 while contributing the remaining $2,500 yourself.

Keeping careful records of your child’s earnings for the year can help you avoid contributing too much to their IRA. Also, offering to put in an equivalent amount (without breaching the limit) can be a good motivator for kids to invest in their IRA.

Benefits of a Child Opening a Retirement Account

Opening up a Roth IRA for a child can benefit them in several ways.

• Kids can get an early taste of what it means to invest money rather than saving it. The IRA can be a teaching tool to help a child learn how the market works and the importance of setting long-term financial goals.

• Kids who start saving for retirement at an early age have the ability to take full advantage of the power of compounding interest. A child who contributes $5,000 each year starting at age 14 and earns a 7% annual return, for example, could have $2.3 million saved for retirement by age 65. Running the numbers using a Roth IRA calculator can give you an idea of how much of a head start on growing wealth you might be able to give your child by opening a minor IRA.

• The money in a Roth IRA for a child is tax-free when they take qualified distributions. This can result in substantial tax savings if they’re in a higher tax bracket when they retire.

Cons of a Child Opening a Retirement Account

Before you open a traditional or Roth IRA for a child, there are some drawbacks to consider.

• While contributing to a Roth IRA may offer some long-term benefits, there are no guarantees, and the money is then locked up until your child turns 59 ½ (although early withdrawals are possible, and might incur a penalty).

• A Roth IRA might affect your college-bound child’s financial aid eligibility. Just having money in a Roth IRA won’t cause any snags if your child is applying for federal student aid. But if they withdraw contributions from their Roth IRA for any reason — including paying for college expenses — that money is counted as income, which may affect eligibility for need-based aid.

• Investments within a custodial IRA entail some level of risk, as with all investments.

Pros	Cons
An IRA can be a good way to teach kids about investing and the stock market.	Funds in an IRA are typically restricted (although Roth contributions can be withdrawn at any time, penalty-free).
Starting an IRA for a child at a young age means they have more time to benefit from compounding interest.	Withdrawal of contributions from a Roth IRA could affect a child’s financial aid eligibility.
Qualified distributions are tax-free in retirement.	Investments within a custodial IRA entail some level of risk.

The Takeaway

IRAs can be a valuable addition to a retirement savings strategy if you’re interested in investment planning for children or for yourself. If you haven’t started saving for the future yet or your child is starting to earn income of their own, there’s no time like the present to consider opening an IRA.

FAQ

How do I set up a retirement account for a minor?

To get started, find out which brokerages allow you to open custodial IRAs for minor children. Then you need to choose a brokerage and IRA type, fill out the appropriate paperwork, and make a deposit or transfer to fund the IRA.

How do I give my kids an IRA?

You can open an IRA for your child once they have earned income of their own. This would be a custodial account: You own it until the child reaches adulthood, at which point it belongs to them. The other way to give an IRA to your kids is to name them as your IRA beneficiary when you pass away. If the child is a minor when they inherit the IRA, they would need a custodian to manage it for them.

When can I start a 401(k) for my child?

You can’t start a 401(k) for a child, unless you run a business that offers a 401(k) to its employees and your child works for you. You can, however, open an IRA for a minor child who has earned income, and make contributions to it on their behalf, as long as the total contributions don’t surpass the amount earned by the child that year.

About the author

Rebecca Lake

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Mar

2025

What Is a Series E Savings Bond?

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

Series EE bonds, or Patriot Bonds, were initiated in 1980 as a low-risk way for Americans to save. The money invested is guaranteed to double in 20 years.

They build upon the tradition of Series E bonds, or war bonds, which were introduced by the federal government in 1941. Learn more about this savings vehicle here.

Key Points

• Series EE bonds, introduced in 1980, are low-risk U.S. Treasury bonds guaranteed to double in value within 20 years, making them a safe investment option.

• These bonds can only be purchased electronically through a TreasuryDirect account, with a minimum purchase of $25 and a maximum of $10,000 per person annually.

• Interest on Series EE bonds compounds semi-annually and is taxable at the federal level, although tax exemptions may apply for qualified education expenses.

• Holding Series EE bonds for 20 years will yield a guaranteed return, but they can also be held for an additional 10 years to continue earning interest.

• Alternative investment options, such as high-yield savings accounts and stocks, may offer better returns but come with varying levels of risk compared to Series EE bonds.

What Is a Series EE Bond?

A series EE bond is a U.S. Treasury bond. It’s considered to be a very safe investment, as it’s backed by the U.S. government. It is guaranteed to double in value in 20 years, even if the government has to add funds to it to meet that mark.

To provide some context, here’s a quick look at what bonds are and how bonds work. A bond is a debt instrument. Bonds are issued by corporations or governments in order to raise capital. The bond market is huge — much larger than the equity markets. (In 2023, the market cap of the global bond market was about $133 trillion, versus $111 trillion for the stock market.) Investors provide capital to companies and governments when they buy the bonds, effectively loaning their money to that institution.

Meanwhile, the bond issuer agrees to pay investors the capital back, along with interest, after a certain period.

There are different kinds of bonds investors can purchase, including municipal, corporate, high-yield bonds, and U.S. Treasuries. A savings bond is a type of U.S. Treasury bond, issued with the full faith and credit of the U.S. government, meaning there’s virtually no chance of losing money. Savings bonds allow the government to borrow money for various purposes while giving investors a reliable and predictable stream of interest income.

Series E bonds, which were created in 1941 to help fund the WWII effort, were replaced in 1980 with Series EE bonds, or Patriot Bonds.

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How Do Series EE Bonds Work?

If you’re interested in buying bonds, here are details on how a Series EE bond works:

• Series EE bonds are electronic and can only be purchased and managed online with a TreasuryDirect account. They are available in any denomination starting at $25, up to $10,000 per person named on the bond, per calendar year.

• These bonds are guaranteed to double in value in 20 years, even if the government needs to kick in extra cash. You can hold the bond for up to 10 additional years to continue to earn interest.

• When you purchase a Series EE bond, the interest rate will be stated. Through October 31, 2024, the interest rate is 2.70%.

• Interest is earned monthly, compounding semi-annually, for up to 30 years, unless you cash it sooner.

• Series EE bonds can be cashed in (or redeemed) after 12 months, but early withdrawal can trigger a penalty of partial interest loss.

• Electronic Series EE bonds can be cashed in via the TreasuryDirect site.

• Interest earned on Series EE bonds is taxable at the federal level. Federal estate, gift, and excise taxes, as well as state estate or inheritance taxes, may also apply. If the money is used for qualified education expenses, however, you may not be subject to taxes.

• The TreasuryDirect site also makes 1099-INT statements of interest earnings available annually.

Understanding Series E Bonds

The popularity of Series E bonds may have hinged largely on the patriotic call to purchase them as part of the war effort. Buying bonds served two purposes: It helped the government to raise money for the war and it also helped to keep inflation at bay as shortages threatened to push consumer prices up. Apart from that, there were other qualities that might have made a Series E saving bond attractive.

These bonds were issued at 75% of their face value and returned 2.9% interest, compounded semiannually if held to 10-year maturity. So investors were able to earn a decent rate of return on their investment.

Series E bonds were also affordable, with initial denominations ranging from $25 to $1,000. Larger denominations of $5,000 and $10,000 were added later, along with two smaller memorial denominations of $75 and $200 to commemorate the deaths of President Kennedy and President Roosevelt, respectively.

Series E bonds were redeemable at any time after two months following the date of issue. Bond purchasers could redeem them for the full face value, along with any interest earned.

Interest from Series E bonds was taxable at the federal level but exempt from state and local taxes, adding to their appeal. And because they were issued by the federal government, they were considered a safe investment.

Series EE Bond Maturity Rate

The maturity rate for EE bonds depends on when they were first issued.

Here’s a table showing the maturity dates for Series EE bonds over time:

Issuing Date	Maturity Period
January – October 1980	11 years
November 1980 – April 1981	9 years
May 1981 – October 1982	8 years
November 1982 – October 1986	10 years
November 1986 – February 1993	12 years
March 1993 – April 1995	18 years
May 1995 – May 2003	17 years
After June 2003	20 years

Recommended: 13 Tips for Aggressively Saving Money

Are Series EE Bonds Right for Me?

Series EE bonds can be a convenient, low-risk way to help your money grow over time. Plus, many people like the idea of investing in America and having their investment backed by the U.S. government. However, the rate of return may not be optimal, and the bonds are typically held for quite a long time versus a short-term investment.

Here are two popular alternatives you might consider to grow your money:

Savings Accounts

A savings account is a deposit account that’s designed to hold the money you don’t plan to spend right away. You can find various types of savings accounts at traditional banks, credit unions, and online banks. Savings accounts can pay interest, though not all at the same rate.

High-yield savings accounts at online banks, for example, tend to pay much higher rates than basic savings accounts at brick-and-mortar banks. Currently, they may offer around 4.60% APY (annual percentage yield) versus 0.58% for savings accounts.

Stocks

If you’re unclear about how stocks work, they effectively represent an ownership share in a company. When you buy shares of stock, you’re buying an ownership stake in a publicly traded company. The way you make money with stock investing is by buying low and selling high. In other words, you want to purchase stocks at one price then sell them for a higher price.

Stock trading can be a more powerful way to build wealth over time versus keeping money in a savings account or buying bonds. But there’s a tradeoff since stocks tend to be much riskier than bonds or savings accounts. Buying shares of mutual funds or exchange-traded funds (ETFs), which hold a collection of different stocks as well as bonds, is one strategy for managing that risk.

Banking With SoFi

Series EE savings bonds can be a safe way to earn a steady rate of return. However, they aren’t the only way to grow your money.

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FAQ

When should I cash in EE savings bonds?

Series EE savings bonds are optimally held for 20 years, at which point the money invested will have doubled. If you’d like to keep earning interest, you may hold the bonds for up to an additional 10 years.

How long does it take for a Series EE savings bond to mature?

Series EE savings bonds mature in 20 years. At the end of that period, the initial investment’s value will have doubled. You may hold them an additional 10 years and continue to earn interest, if you like.

Do Series EE savings bonds double after 20 years? 30 years?

Series EE savings bonds double after 20 years. If you don’t redeem them, you may continue to earn interest on them for another 10 years, for a total of 30 years.

About the author

Rebecca Lake

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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.

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.

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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1895800-V1

Mar

2025

What Are Separately Managed Accounts? How Do They Work?

What Is a Separately Managed Account (SMA)?

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

A separately managed account (SMA), also referred to as a managed account, is an investment account that is like a customized portfolio of individual securities. An individual investor owns those securities — which may include stocks, bonds, and other investments — but a professional money manager oversees the account.

High net-worth investors who want to build customized portfolios often use separately managed accounts (or SMAs), which allow them to keep their assets separate, versus pooling funds alongside other investors through a mutual fund or exchange-traded fund (ETF).

Understanding what an SMA is, as well as the differences between these accounts and mutual funds and other types of pooled investments can help you decide if an SMA is the right approach for you.

How SMAs Work

Investors pay a financial professional to manage the separately managed accounts they own. The portfolio manager handles day-to-day decision making, but the investor retains control over the overall SMA investment strategy. That includes making initial decisions about which securities to hold inside a separately managed account.

A wealth management firm may give SMA investors several portfolio options to choose from. These portfolios can include a mix of different securities that reflect a specific investment strategy or goal. For example, SMA investing may focus on:

• Increasing tax efficiency

• Generating current income

• Managing interest rate risk

• Delivering above-average returns through trend trading

• Promoting ESG (environmental, social and governance) principles

Within the portfolio there may be stocks, bonds, cash or cash equivalents, or other assets. Stock investments may include small-cap stocks, as well as mid-cap, or large-cap companies. It would be up to the investor to choose which strategy to follow, based on their individual needs, risk tolerance, and objectives.

Recommended: What Is Market Capitalization?

The fees for separately managed accounts are typically based on a percentage of the assets under management, or AUM. Often, the management firm uses a tiered structure in which the fee decreases as the account balance climbs. So, in some cases, the more you invest in a separately managed account, the less you’ll pay as a percentage of assets for professional management.

Wealth managers may also charge fees based on the type of investment strategy. For instance, you may pay one management fee for an equities-based strategy but a different fee if you focus on fixed income. Generally, separately managed accounts do not carry trading or transaction fees the way there would be in a traditional brokerage account.

How Can SMAs Benefit an Investor?

Separately managed accounts can yield some benefits to investors who can afford them. Generally, SMA investing may be a good fit for higher net worth investors who want to take advantage of professional asset management while still being able to decide what happens with their portfolios.

SMAs sit at the opposite end of the spectrum from robo-advisor accounts. Robo advisors, or automated platforms, typically offer an investing strategy that’s driven by an sophisticated algorithm on the back end. While robo services can vary from company to company, generally the algorithm creates pre-set portfolio options that investors can choose from, based on individual preferences.

Here are some of the key benefits associated with separately managed accounts.

Control, Transparency, and Customization

While an asset manager may make investment decisions on an investor’s behalf, the investor still has the final say on what happens with their portfolio inside a separately managed account.

For instance, if you’re offered a prebuilt portfolio you may be able to exclude certain securities or request that others be added to align with your investment goals. Or you may be able to work with your advisor to hand-pick all the securities that are held inside an SMA, or to change the direction of the strategy in the case of a recession or other market event.

Either way, you always directly own the securities held inside your account.

Tax Benefits

Managing tax liability in an investment portfolio matters. The more tax efficient your portfolio is, the more of your returns you get to keep. With separately managed accounts, a financial advisor or wealth manager can implement tax-loss harvesting strategies to help you get the most from your investment dollars.

Cost

As mentioned, with separately managed accounts, fees are typically asset-based. That means you typically won’t pay commission fees, and since you’re investing in individual securities versus pooled investments (like mutual funds or ETFs), you don’t have to pay fund expense ratios either.

Compared to the fees associated with investing in mutual funds or trading in taxable brokerage accounts, SMAs can be more cost-friendly for investors.

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

What Are the Drawbacks of SMAs?

While separately managed accounts may work well for some types of investors, they aren’t necessarily a good fit for everyone. Here are some of the downsides of SMAs to keep in mind.

Investment Minimums

Separately managed accounts typically have higher minimum investment requirements, which may be a barrier to entry for some investors. You may need $50,000 to $100,000 or more to open a separately managed account. The reason being that SMAs provide a highly customized investment portfolio for the investor: hands-on investment management.

By contrast, the investment minimums required to open a traditional self-directed brokerage account can be quite low, depending on the type of account and the institution. Again, this is because a professional manager is not involved.

So if you’re just getting started with investing, you may not qualify for a separately managed account.

Less Diversification

Since separately managed accounts hold individual securities, it’s harder for them to offer the same level of broad-based diversification as a mutual fund or exchange-traded fund (ETF), which could hold hundreds or thousands of different stocks.

SMAs vs Pooled Investment Funds

The main similarity between separately managed accounts and pooled investment funds, e.g. mutual funds and exchange-traded funds, is that SMAs are portfolios of many securities, and the portfolio of a mutual fund or ETF also includes many securities. But SMAs are customized based on the individual investor’s wishes, and managed by a professional investment manager who adheres to the investor’s strategy.

Comparing SMAs and Mutual Funds

With an SMA, your portfolio includes individual securities that you own. A mutual fund, on the other hand, is a pooled investment that includes money from multiple investors.

When you invest in a mutual fund, you don’t get to choose what the fund holds. That’s the job of a fund manager, who decides what to buy or sell, based on the fund’s objectives. So a fund may hold a mix of stocks, bonds, cash or other securities. You, along with the other investors who have pooled their money in the mutual fund, share in the fund’s returns or its losses.

Compared to separately managed accounts, mutual funds can have a much lower initial investment to get started: a hundred dollars versus tens of thousands of dollars (depending on the fund).

And instead of paying an asset-based management fee, mutual funds charge expense ratios. This expense ratio reflects the annual cost of owning the fund.

The Difference Between SMAs and ETFs

The difference between separately managed accounts and exchange-traded funds (ETFs) is similar to the difference between SMAs and mutual funds. Instead of building a portfolio that’s composed of individual securities and managed by a financial professional, you’re pooling money into a fund along with other investors.

This fund can hold hundreds of securities and have specific goals. For example, there are ETFs that invest in gold, in commodities, in biotech, and more.

Many investors begin by putting their money into exchange-traded funds or mutual funds, and then move some of their portfolio into a separately managed account once it grows larger.

The Takeaway

Separately managed funds are a popular way for high net worth investors to have some control over their professionally managed funds when building an investment portfolio. However, if you can’t meet the high minimum investment requirements for a separately managed account, you may want to consider investing in ETFs or mutual funds instead.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

How are SMAs customized?

With an SMA, you can work with your financial advisor and/or investment manager to pick all the securities that are held inside an SMA. You can choose to exclude certain securities or ask that others be added to align with your investment goals. You can also request to change the direction of the strategy in the case of a market event like a recession.

What type of due diligence do you need to do before investing in SMAs?

An investor should do thorough due diligence on the money manager they’re considering working with before setting up an SMA. Investigate the manager’s investment philosophy, approach, and process, inquire about their compliance history, and ask to see performance data, including quarterly returns. Inquire about all the fees involved, including transaction expenses. And finally, find out how the investment manager is compensated and what their incentives are.

What is the difference between a separate account and a separately managed account?

A separate account and a separately managed account are the same thing: an investment vehicle that holds securities and is owned by an investor and managed by a professional financial advisor or money manager. These accounts are sometimes referred to by either name.

About the author

Rebecca Lake

Photo credit: iStock/adamkaz

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.

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

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

SOIN0723144

Mar

2025

What Does Bullish and Bearish Mean in Investing?

By Paulina Likos | Growing Wealth, invest, Investing, Terminology | Comments Off

Markets are often described as being either bullish vs. bearish. These are common terms used to refer to how a market is performing over a shorter or longer period of time. Investors can also be bullish or bearish on a specific stock, a sector, an asset class, or on the economy in general.

Read on to learn more about the definitions of bearish vs. bullish, where the terms bullish and bearish come from, and the bullish and bearish meaning for investors in stocks or other markets.

Key Points

• A bull market features rising stock prices and high investor confidence.

• Bear markets are generally marked by a 20% drop in stock prices and sustained low investor confidence.

• Investor behavior in bull markets includes increased buying and holding of stocks.

• In bear markets, investors tend to move to safer investments and may sell assets.

• Diversifying investments and dollar cost averaging may help manage risks in bear and bull markets.

What Does Bullish Mean?

Bullish refers to stock market sentiment that the direction of the overall market will go up. A market that is increasing in value over a long period of time is said to be in a bull market. A bullish trend means that there may be an upward trend in prices for an asset.

For investors, being bullish means they feel positive about a stock, index, or the overall stock market. For example, if an investor says they are bullish on Stock X, the investor expects the market value of Stock X to increase in the long-term. That bullishness may even compel the investor to buy more shares of the company.

A bullish market is generally one where prices go up by 20% from a previous low for a sustained period.

What Does Bearish Mean?

Bearish refers to a sentiment that the direction of securities or the overall market will move down in price. An investor characterized as a bear believes the stock market will decrease in value, even if current prices are going up. An investor investing in a bearish market may even sell shares of their portfolio if they believe the market will turn negative.

A bear market is one that has fallen 20% from recent highs and remains below that threshold for at least two months. Since investors are bearish during this period, there may be lower trading activity.

Where Do the Terms Bullish and Bearish Come From?

While there are several theories as to the origins of bullish vs. bearish. The consensus believes the difference between bullish and bearish reflects the way each animal responds when they attack. When a bull goes into attack mode, it races at its target with confidence. In a bull market, investors are confident that stock prices will rise and correspondingly, the value of the market will trend upward.

When bears attack, they swipe their paws in a downward motion and often in fear. That is why in a bear market, prices drop. When investors are bearish, they do not have confidence in stocks and usually end up selling off some of their investments.

How Bullish Markets Can Impact Investors

In a bull market, demand is greater than supply. There are many investors who want to buy stocks while only a few are willing to sell. Bullish traders tend to have long positions in stocks or other assets.

How Bearish Markets Can Impact Investors

In a bear market, supply is greater than demand — and investors may look to offload their shares when there is not a lot of demand for market participants to buy. As a result, share prices decrease. A bear market is challenging for investors because stock prices keep falling, and that means more losses in an investment portfolio.

Your first instinct may be to sell in a bear market, but to increase chances of securing a profit in the long-term, it may make more sense to remain invested. Bear markets do not last forever.

Still, some investors prefer to adjust their investments in a bear market, turning to defensive stocks like consumer staples, healthcare, or utilities. They also may consider going into safer investments like bonds that offer stable fixed-income.

Bear markets can also present a good buying opportunity for investors who use dollar-cost averaging. This involves investing a fixed amount of money consistently. This way, investors can purchase stocks at a more affordable price.

Tips on Withstanding Bullish vs Bearish Markets

One of the best investing strategies during a bull or bear market is diversification. Diversifying your investment portfolio with different securities in a variety of different industries — along with various asset classes that may fare better in bear vs. bull markets — can help protect a portfolio by potentially minimizing losses and maximizing gains over the long-term.

Diversification means buying shares of companies in different sectors and companies of different sizes, rather than just investing in a select few of stocks, and also investing in different types of assets, such as low-risk bonds as well as stocks.

Stock Market

Investors who are not sure how to pick individual stocks can purchase an exchange-traded fund (ETF) or index fund, which are pre-selected baskets of securities all in one investment vehicle. For example, investors who own a fund that follows the S&P 500 will see their investments perform in line with that index.

In an ETF, investors own hundreds of companies, which means they don’t need to painstakingly choose one or two companies, rather, they own the entire index. Investing in these types of securities may be a strategy that utilizes diversification principles to help protect value.

The Takeaway

A market doesn’t necessarily have to be either bearish or bullish. It can actually be neither. The stock market can be in a state that is relatively flat. This may mean there are normal market fluctuations leading to either small gains or small losses.

Even if markets experience a sharp decline or rise in the short-term, this still cannot be defined as bearish or bullish because bull and bear markets are maintained over a period of time.

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

Does being bearish mean that you want to sell your assets?

“Bearish” means general pessimism about the direction of the market. In some cases, people are not even aware of a bear market until it’s over because it’s difficult to predict the direction of the markets. Investors who are invested for the long run do not pay attention to the peaks and troughs of the market and may take a dollar-cost averaging approach by investing consistently over time in both bear and bull markets.

How can you tell if a market is bearish or bullish?

Predicting and timing the markets is a challenging task. However, if stock prices have fallen by more than 20% from their recent peaks, and remained there for more than two months, that’s typically considered a bear market. A sustained increase in prices is a bull market.

Photo credit: iStock/NoSystem images

SoFi Invest®

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

SOIN-Q125-090

What Are Stockholder Voting Rights?

What Do Shareholders Vote On?

What Happens at a Shareholder Meeting?

Notice of Meeting

Minutes of the Previous Meeting

Presentation of Financial Statements

Ratification of Director Actions

Speeches

Open Floor for Shareholder Questions

Election of the Board of Directors and Other Votes

Extraordinary Matters

How Does the Voting Process Work?

In Person

By Mail

By Phone

Over the Internet

What Are Proxy Requirements?

How Do You Know When to Vote?

The Takeaway

FAQ

Which type of stock comes with voting rights?

What is the difference between registered and beneficial owners when voting on corporate matters?

How do shareholders vote for the board of directors?

What is the impact of voting rights?

What is e-voting in shares?

You may also be interested in:

How to Open a Retirement Account for Your Child

Steps to Opening a Retirement Account for a Child

Step 1: Choose a Brokerage

Step 2: Complete the Application

Step 3: Choose an IRA Type

Step 4: Fund the Account and Choose Investments

Different Types of IRAs for Children

Traditional IRA

Roth IRA

Funding a Child’s Retirement Account

Can a Parent Contribute to a Child’s IRA?

Benefits of a Child Opening a Retirement Account

Cons of a Child Opening a Retirement Account

The Takeaway

FAQ

How do I set up a retirement account for a minor?

How do I give my kids an IRA?

When can I start a 401(k) for my child?

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What Is a Series EE Bond?

Get up to $300 when you bank with SoFi.

How Do Series EE Bonds Work?

Understanding Series E Bonds

Series EE Bond Maturity Rate

Are Series EE Bonds Right for Me?

Savings Accounts

Stocks

Banking With SoFi

FAQ

When should I cash in EE savings bonds?

How long does it take for a Series EE savings bond to mature?

Do Series EE savings bonds double after 20 years? 30 years?

How SMAs Work

How Can SMAs Benefit an Investor?

Control, Transparency, and Customization

Tax Benefits

Cost

What Are the Drawbacks of SMAs?

Investment Minimums

Less Diversification

SMAs vs Pooled Investment Funds

Comparing SMAs and Mutual Funds

The Difference Between SMAs and ETFs

The Takeaway

FAQ

How are SMAs customized?

What type of due diligence do you need to do before investing in SMAs?

What is the difference between a separate account and a separately managed account?

What Does Bullish Mean?

What Does Bearish Mean?

Where Do the Terms Bullish and Bearish Come From?

How Bullish Markets Can Impact Investors

How Bearish Markets Can Impact Investors

Tips on Withstanding Bullish vs Bearish Markets

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