Dec
23
2023
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Using Technical Analysis to Research Stocks

By | Growing Wealth, Investing | No Comments

Using technical analysis to evaluate stocks includes using data and indicators to try and identify trends and patterns that can help guide investing or trading decisions. It’s one of the two main forms of stock analysis, the other being fundamental analysis.

Using technical analysis indicators to evaluate stocks isn’t necessarily easy, and is risky for investors who may not know exactly what they’re doing. With that in mind, it may take a long time for investors to feel comfortable with their technical analysis skills. And, of course, even the most seasoned investor could be wrong – but knowing the basics of technical analysis can be helpful for investors of all experience levels.

What Is Technical Analysis?

Technical analysis uses a variety of data points and indicators to evaluate stock performance, and help guide investing decisions. Technical analysis is an investment strategy by which investors try to forecast how a stock price will move based on current data on its past movements.

It uses various sets of data and stock indicators, such as price and volume, to identify patterns and trends. Technical analysis only considers a stock’s price and does not consider other factors, such as how a company operates, its earnings, or its assets. Technical analysts chart this data to help them visualize patterns. Think of these charts as trails that stocks leave behind them as prices move up and down.

One of the basic tenets of technical analysis is that history tends to repeat itself. By examining these trails, and as patterns begin to emerge, analysts can make an educated guess about where stock prices might be headed when current patterns line up with historical patterns.

For example, it may become clear that stock prices move a certain way at a certain time of year on a stock chart. A retailer that might see an uptick in share price during the holiday season, for instance.

Or, maybe it becomes clear that a stock reacts a certain way during specific market conditions. For example, when the price of steel rises, analysts may see a shift in the stock price of auto manufacturers.

Anyone can use technical analysis, though some of the indicators that professional analysts use to analyze stocks may be a bit on the complicated side. However, knowing some basics can be useful even for lay investors to help them make informed decisions about the stocks they choose.


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

Approaches to Technical Analysis

Investors may choose to take a top-down or a bottom-up approach to technical analysis.

Those who take the top-down approach will typically start looking at stocks from a viewpoint that starts broad and gets narrower. For example, they might look at broad indexes like the S&P 500 and narrow their search to individual stocks from there.

Top-downers will also look at individual stocks from a wide time frame to a shorter time frame, perhaps starting by looking at daily charts and zeroing in on hour-to-hour charts to figure out the best time to execute a trade.

When using a bottom-up approach, investors look immediately at individual stocks, searching for points at which the stock is perhaps undervalued that might provide an opening point at which to buy.

The Basics of Technical Analysis

Investors who use technical analysis have a number of tools available to help them analyze stock. Here’s a look at some of the most common tools and how they are used:

Price

The main factor that technical analysis considers is price. Stock charts show how price changes over time, and technical analysts look for ways to read those charts to identify trends in price or other factors, like volume.

Investor Behavior

Technical analysts also consider how investor behavior, or psychology, can have big effects on how prices move. Understanding patterns in price can help analysts understand how other investors are likely to react under certain conditions given how they’ve reacted in the past to similar situations.

Stock Charts

Technical analysis is all about keeping track of the trail that stocks leave behind. One of the ways that investors and analysts organize this data is with stock charts, including bar, line, and candlestick charts. These charts can cover wide or short time frames and show the patterns of how trades are executed.

You’re likely familiar with line and bar graphs in which the height of the bar or line illustrates the up and down movement of the stock. Candlestick charts may be a little bit less familiar and can be an extremely useful tool if you can read them.

Candlestick charts are made up of distinct pieces, “candlesticks,” that look like a cylinder with a line coming out of the top and bottom. The cylinder and the lines should be read as three parts. There are four pieces of data represented in each candlestick — opening price, closing price, and the high and the low.

Additionally, each candlestick represents a period of time. Say one candlestick represents five minutes. Within that five-minute period, the bottom of the body of the candlestick represents the opening price of a stock and the top of the body represents the closing price.

The line extending downward from the body represents the low within that time period, and the line extending upward represents the high. If the closing price is higher than the opening prices, the candlestick is colored green, and if it’s lower, the candlestick is colored red.

Each candlestick is read in the context of the other data points around it, and gives analysts a detailed look at how investors are buying and selling stocks over a given period of time. Certain candlestick shapes can be an indicator of distinct changes in the market.

A hammer candlestick has a low, low price, but its closing price is close to its opening price, indicating that prices have potentially hit a low and are reversing. Its inverse, a shooting star candlestick, indicates that prices may have peaked and are on their way down.

Trends

Technical analysis looks for trends that can help indicate the direction a stock price is moving. As the stock price goes up, it is on an upward trend. As it goes down, it’s on a downward trend. By comparing current trends to historical data, technical analysts may be able to predict where the trend is headed and what points may represent its highs and lows.

Momentum Indicators

Analysts can measure the strength of trends and movement in price by taking a look at momentum indicators. This indicator compares the most recent closing price to previous closing prices. In a stock chart, the momentum indicator is represented as a separate line from the price line.

Momentum indicators may be expressed as the difference between the current closing price and the closing price a certain number of periods ago. Or it may be expressed as a percentage, or rate of change, by dividing the current closing price by a past closing price.

The momentum indicator helps investors know whether the price of a stock is moving up or down, but, more importantly, it helps them know how fast it’s moving. When calculating the difference, a positive number means prices are moving up, while a price below zero indicates prices going down.

When calculating a rate, when the rate is above 100, the price is on an upward trajectory. When it’s below 100, the price is on a downward trajectory. How far the rate is above or below zero or 100 is an indication of how fast the price is moving. For example, a momentum of 90% is moving down faster than a rate of 95%.

In general, momentum indicators are used less to provide a signal that investors should make a trade than they are used to help support trades made based on other price actions. For example, if the price of a stock is moving down but downward momentum is slowing, it may help provide confirmation it’s a good time to buy if other indicators also show it’s a good time to buy.

Volume

Stock volume is a measure of the number of shares that are being bought and sold during a given period. Another way to look at volume is that it represents investor interest in a stock. The more stock being traded, the heavier the volume and the greater the interest.

Investors can look at volume as an indicator that prices are changing, and rising volume can be a sign that stock price is starting to move in a significant way.

That said, it is possible that high volume can represent the end of a trend. For example, investors hoping to take advantage of a rise in a stock price may pile on at the end as the stock price is reaching its peak and just about to fall.

Support and Resistance Levels

One of the patterns that analysts will look out for when looking at stock charts are certain thresholds at which stock prices tend to rise or fall. The support level is a point to which a stock will sink but won’t usually fall any further before rising again.

It is essentially the level at which demand is strong enough to bolster the price. Conversely, there is also frequently a price ceiling that stocks will hit that may cause prices to fall back down.

This is the resistance level, the level at which selling is strong enough to prevent prices from rising. Investors may pay attention to these levels, choosing to buy when prices are near the support level or sell as prices meet the resistance level.

Moving Averages

Price movement over a given period of time can make a stock chart overwhelming to look at. The ups and downs of the line can be visually confusing and messy to look at. A way to simplify and show trends more clearly is by using a moving average.

This indicator focuses less on day-to-day movement and more on average price over time. A simple moving average (SMA) takes the sum of the closing prices over a given period of time and divides by the number of prices used. So if you were looking at a three-month period, you would add all the closing prices up over that period and divide by 90.

Technical Analysis vs. Fundamental Analysis

Fundamental analysis is another school of thought you may encounter when evaluating stocks. This strategy is a bit in opposition to technical analysis. For technical analysts, price is king. That’s why technical analysts are always looking at price and always looking for price patterns then can take advantage.

The fundamental analysis school of thought takes a deeper dive into a stock’s intrinsic value by looking at factors such as the underlying company’s financial statements, its assets and liabilities, how the company is governed, and the overall market and economy.

Whereas technical analysis is focused almost entirely on numbers, fundamental analysis looks at both qualitative and quantitative measures to determine the fair market value of a stock and compare whether its current price on the market is over- or under-valued.

That said, technical analysts would argue that the factors examined through fundamental analysis are already accounted for in the price of stock. As a result, they might say that examining price and trends is a more efficient form of analysis.

Technical Analysis and the Average Investor

The average investor interested in experimenting with technical analysis can turn to a variety of sources to find data sets and indicators. If you know where to look, there are reams of charts, data, and indicators, such as moving averages, that investors can use to track the past price and performance of stocks.

It should be noted that predicting the future price movement of stocks is very difficult. In fact, the efficient market hypothesis states that because markets are efficient, stock price reflects all available information about a stock. And nobody has a crystal ball – so, no matter how confident you are about a stock’s future movement, remember that there’s always risk involved.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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


SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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

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

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23
2023
What Is Initial Margin? Initial Margin Definition & Examples

What Is Initial Margin? Examples and Minimums

By | Growing Wealth, invest, Investing | Comments Off on What Is Initial Margin? Examples and Minimums

When an investor buys a security using a margin account, the initial margin or initial margin requirement is how much of the purchase price – represented as a percentage – that the investor must cover with either cash or the collateral in that account.

The Federal Reserve Board’s Regulation T sets the minimum initial margin at 50%, meaning investors trading on a margin account must have cash or collateral to cover at least half of the market value of the securities they buy on margin.

Using Initial Margin

Investors who want to open a margin account at a brokerage must first deposit the initial margin requirement. They can make that deposit in the form of cash, securities or other collateral, and the amount they deposit will vary depending on how much trading the investor plans to do on margin, and where the brokerage firm sets its initial margin.

Once the investor makes that initial margin deposit as collateral, they essentially have a line of credit with which they can begin margin trading. That line of credit allows the investor to buy securities with money borrowed from the brokerage.

As noted, Regulation T sets minimum initial margin levels. It’s important to note, however, that the Federal Reserve Board’s Regulation T only sets the minimum for margin accounts. Brokerage firms offering margin accounts can set their initial margin requirement higher than 50% based on the markets, their clients, and their own business considerations. But brokerages cannot set the initial margins for their clients any lower than 50%. The level that a brokerage sets for margin is known as the “house requirement.”

Risks of Margin Trading

Trading on margin brings its own unique set of opportunities and risks. It can lead to outsized profits if investors buy appreciating stocks on margin. But if investors buy sinking securities on margin, they can lose even more than if they’d purchased the securities outright.

In the unfortunate situation where the securities purchased on margin lose all value, the investor must deposit the full purchase price of the securities to cover the loss. Given these risks, you’re typically not able to trade on margin in retirement accounts such as an IRA or a 401(k).

Sometimes investors use margin to short a stock, or bet that it will lose value. In that instance, they’d borrow shares from the brokerage firm that holds a position in the stock and sell them to another investor. If the share price goes down, the investor can purchase them back at a lower price.

In general, investors looking for safer investments might want to avoid margin trading, due to their inherent risk. Investors with a high appetite for risk, however, might appreciate the ability to generate outsize returns.


💡 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.

How Do You Calculate Initial Margin?

An investor who wants to trade in a margin account, must first determine how much to deposit as an initial margin. While that will depend on how much the investor wants to trade, and how big a role margin will play in their strategy, there are some guidelines.

The New York Stock Exchange and some of the other securities exchanges require that investors have at least $2,000 in their accounts. For day traders, the minimum initial margin is $25,000. Each brokerage has its own set of requirements in terms of the amount clients need to keep as collateral, and the minimum size of the account necessary to trade on margin.

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Initial Margin Requirement Examples

It’s possible, for example, that a brokerage firm might require 65% initial margin. That’s the first number an investor needs to know. The next is how much they plan to invest. The initial margin calculation simply requires the investor to multiply the investment amount by the initial margin requirement percentage. For an investor who wants to buy $20,000 of a given security, they will take that purchase price, multiply it by the margin requirement is 65% or 0.65 – to arrive at an initial margin requirement of $13,000.

The advantage for the investor is that they get $20,000 of exposure to that stock for only $13,000. In a scenario where the investor is buying a stock at a 50% margin, that investor can buy twice as many shares as they could if they bought them outright. That can double their return if the stock goes up. But if the stock drops, that investor could lose twice as much money.

If the price falls far enough, the investor could get a margin call from their broker. That means that they must deposit additional funds. Otherwise, the broker will sell the stock in their account to cover the borrowed money.

Initial Margin vs Maintenance Margin

For investors who buy securities on margin, the initial margin is an important number to know when starting out. But once the investor has opened a margin account at their brokerage, it’s important to know the maintenance margin as well.

The maintenance margin is the minimum amount of money that an investor has to keep in their margin account after they’ve purchased securities on margin. It is generally lower than the initial margin.

Currently, the minimum maintenance margin, as set by the Financial Industry Regulatory Authority (FINRA,) is 25% of the total value of the margin account. As with the initial margin requirements, however, 25% is only the minimum that the investor must have deposited in a margin account. The reality is that brokerage firms can – and often do – require that investors in margin accounts maintain a margin of between 30% to 40% of the total value of the account.

Some brokerage firms refer to the maintenance margin by other terms, including a minimum maintenance or a maintenance requirement. The initial margin on futures contracts may be significantly lower.

Maintenance Margin Example

As an example of a maintenance margin, an investor with $10,000 of securities in a margin account with a 25% maintenance margin must maintain at least $2,500 in the account. But if the value of their investment goes up to $15,000, the investor has to keep pace by raising the amount of money in their margin account to reach the maintenance margin, which rises to $3,750.

Maintenance Margin Calls

If the value of the investor’s margin account falls below the maintenance margin, then they can face a margin call, or else the brokerage will sell the securities in the account to cover the difference between what’s in their account and the maintenance margin.

With a maintenance margin, the investor could also face a margin call if the investment goes up in value. That’s because as the investment goes up, the percentage of margin in relation by comparison goes down.

The Takeaway

Initial margin requirements and maintenance margins are just two considerations for investors who are looking to trade on margin. They allow investors to understand how much cash they need to hand on hand in order to trade on margin — and when they might be susceptible to a margin call.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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

FAQ

What is an example of initial margin?

If initial margin is 65% and an investor wants to purchase $20,000 of a given security, they will take that purchase price, multiply it by the margin requirement is 65% or 0.65 – to arrive at an initial margin requirement of $13,000.

Is initial margin refundable?

Yes, initial margin is refundable, as it acts as a deposit put forward to enact a transaction or trade.

Why is initial margin important?

Initial margin is important because it acts as a form of collateral to cover a loss in the event loses money using borrowed funds. It helps the lender – or brokerage – recoup some of those losses.

Why is initial margin paid?

Initial margin is paid or put forth to act as a deposit or a form of collateral and establish good faith between a borrower and lender, typically an investor or trader and their brokerage.

Who sets the initial margin requirement?

Initial margin requirements are established by the Federal Reserve’s Regulation T. But there can also be other requirements put in place by an individual brokerage, and FINRA’s additional margin rules can further increase the amount.

Does initial margin have to be cash?

Generally, initial margin needs to be in the form of cash deposits, but it’s possible that some brokerages will allow it to take the form of other securities, such as government bonds.

Is initial margin a cost?

Initial margin is not a cost per se, but a form of collateral, and is money that is returned or refunded like a deposit. As such, it’s not spent or a typical “cost,” though it may be a financial barrier of sorts for some traders.

Photo credit: iStock/FG Trade

SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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

*Borrow at 11%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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23
2023
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Putting Goals-Based Investing Into Practice

By | Growing Wealth, invest, Investing | No Comments

Using a goal-based investing strategy means to focus more on specific outcomes related to an individual’s goals, rather than trying to outperform the market or certain market benchmarks. Investment goals will and do vary from investor to investor, so a goal-based investing approach will vary as well – the specifics will all depend on an investor’s individual goals.

If goal-based investing sounds appealing, learning the basics does amount to a big lift. Read on to learn what you need to know to piece together a goal-based investment strategy.

What Is Goals-Based Investing?

Goal-based investing, also known as goals-driven investing, is exactly what it sounds like; it’s an investment approach focused on your financial goals, rather than on market benchmarks.

Traditionally, investment strategy focuses on portfolio returns and measuring risk tolerance, or, how much risk you want in your investments. Those factors would then determine your investment strategy and portfolio makeup. Investments can make money in a number of different ways, including yielding interest or dividends which translate to earnings for the investor.

What you choose to invest in, and how much, is known as your asset allocation. And your asset allocation is determined by what you want out of your investment returns and your investment timeline.

For example, your investment strategy might be different if you’re going to retire in five years compared to someone who plans to retire in 25 years. Goals-based investing, by contrast, measures your portfolio against your goals. That allows you to plan for different goals with different investment strategies.


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

Crafting and Implementing a Goal-Based Investment Strategy

The key to goal-based investing is figuring out short-term and long-term financial goals.

Identifying Financial Goals and Assessing Risks

In the short term, goals could include saving for a vacation or a wedding; something like a down payment on a house might be a medium-term goal; and setting aside money for retirement — whatever kind of retirement you envision — is perhaps the longest-term goal.

Some common financial goals include: saving up an emergency fund; accumulating enough for a large purchase, like a car or a trip; paying for your kids’ colleges; putting a down payment on a house; caring for elderly parents and other loved ones; and planning for retirement. These all require different strategies and different timelines.

The Process: Discover, Advise, Implement, and Track

The first step in developing your goals and implementing them into a goal-based investment strategy is to take a realistic look at your current financial situation. Talking to a financial professional or advisor may help you refine and clarify your financial objectives. Then, create targets and separate accounts for your various goals.

From there, you’ll want to actually implement your strategy as they align with your goals. That likely includes actually figuring out the investment strategy for each of your investment accounts. For example, you might have a different investment strategy for savings you’re going to use in five years, versus your retirement savings that you’re going to use in 20 years.

Tracking is the final item on the list – you’ll want to keep an eye on your accounts and make sure that you stay on track with your goals, or change gears when needed.

Practical Aspects of Goal-Based Investing

Goal-based investing has some practical advantages, such as that you can adapt your investment strategy to meet your actual needs. Many households have far more goals than just retiring — and have not, historically, had a way to plan for them. The other benefit of goals-based investing is a bit more psychological.

A number of recent studies and research also suggest goals-based investing can have a behavioral impact on how you act—including, how invested you are in your investments and how emotionally you react to market fluctuations. Having a goal helps you focus your efforts. But where to focus them?

Typical Goals and Associated Risks

Some typical investing goals include retirement, a child’s education fund, or even a vacation or new car – there really isn’t a limit. Some people may simply want to accrue a massive amount of money in a retirement account, like $1 million. For some people, that’s doable – given enough time, resources, and fortunate market swings.

But each of those goals has its own risks. For instance, investing to try and accrue enough money to retire likely involves a long-term strategy, and an aggressive one. That may mean investing in riskier assets that are more volatile. Alternatively, investing with the goal of accruing enough money to take a vacation – in three years – may mean using a less-risky strategy, and investing in different types of stocks, bonds, or other securities.

Bucketing Goals into Broad Categories

Many, if not most investors will likely have many goals. As discussed, those can include retirement (a long-term goal), with vacations, tuition, or other goals that are shorter-term. For some investors, it may be helpful to mentally “bucket” those goals into different categories to help reach them.

For example, it may be helpful for some investors to group their shorter-term goals together, and utilize a higher-risk, higher-potential-reward strategy to try and reach them sooner. They could use a less-risky approach to their longer-term goals, such as retirement or funding a child’s education.

Goal-Based Investing with Professional Guidance

As discussed, some investors may find developing a goal-based investing approach to be easier with some professional guidance.

Working with Financial Advisors for Goal-Based Planning

Investors may opt to work with a financial professional for any number of reasons, and developing some goals and implementing those goals into an investing plan could easily be one of them. There are financial professionals out there who specialize in goal-based planning approaches, too.

Effectively, working with a professional to develop a strategy would likely involve identifying or tagging the specific goals or objectives an investor is trying to reach, and then creating a specialized investing plan or roadmap to get them there. Again, the specifics of such will depend on an individual investor, but in general, investors could probably expect some introspection into their hopes for the future, and some discussion as to how, specifically, to achieve those hopes.

Evaluating and Adjusting Your Investment Strategy

Many investors will implement a strategy and then need to tweak or adjust it as they go along – the market isn’t static, after all, and things change. As such, it’s important to be ready to evaluate and adjust your strategy over time.

Keeping Your Investment Plan Up to Date

While the market will see its ups and downs over time, other things will change, too. The economy will expand and contract, investors may have different jobs and income levels, and interest rates may change, too. This can all have an effect on your investment plan, and may require changes.

An investor can do those with the helping hand of a professional, of course, but the point is that a static plan likely won’t be the most efficient in a dynamic world.

Adapting to Changes in Goals and Market Conditions

Goals-based investing also gives you more buy-in as an investor, and more of a say in the process. However, the danger of goals-based investing is you might not fully know what your goals are — or, more likely, what your goals will be down the road. Researchers have found that we often fail to predict how much we will change in the next decade, and in turn, that can have a distorting effect on our goals and how we plan for them.

For example, right now, you might think you want a low-key retirement in a rural woodsy cabin, but what happens if you only invest enough to purchase a small cheap plot of land and then you change your mind in 20 years and need more money? That’s also why you want to re-evaluate your goals regularly and change your investing strategy as appropriate.

Goal-Based Investing Examples

Here’s a simple example of a goal-based investing example: Let’s say an investor’s goal is to accrue enough money to purchase a house. So, they’re aiming for a 20% down payment on a $500,000 home – a total of $100,000. And, they want to start with an initial investment of $50,000, and reach their goal within three years.

Accordingly, the aim is to return 100% over a three-year period. With that goal in mind, the next step is to implement a strategy that has the best possibility of attaining that goal. That means choosing how to deploy or allocate the initial investment to try and give themselves the best chance of reaching their goal.

Again, it may be helpful to have some professional guidance, but an investor may look at investing in specific ETFs or mutual funds, and certain stocks – there’ll be risks to consider, and a bit of tea-leaf reading to try and sense where the market is going. It won’t be easy, but it’s possible to reach that goal.

Similar strategies could be enacted for other goals, too, like building an emergency fund, or retiring. But the nuts and bolts of it all will depend on the individual investor.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


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


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SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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

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

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Dec
22
2023
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Student Loan Forgiveness for Engineering Students

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

Student loans are mounting for college and graduate students, with engineering majors being no exception. In fact, for the 2020-21 school year, 54% of bachelor’s degree holders left school with student loans—with a debt level of $29,100, on average. Nationally, Americans have $1.6 trillion in student debt combined. Given that engineering is the fourth most common major, many of those shouldering student debt are engineering students.

Since careers in engineering can come with salaries well into the six-figures, some students might consider taking on student loans in order to follow all the way through to a master’s degree in that area. But getting there isn’t cheap. The typical engineering grad school student can expect to spend upwards of $50,000 or more for their masters degree. And that doesn’t include possible balances carried over from their undergrad years. The average student debt for engineering undergrad students varies, but when you factor in graduate school and undergraduate debt, that could mean a substantial amount of student debt.

If you’re studying to be an engineer, you may assume there aren’t many loan assistance programs out there for you, and it’s true that there are no federal forgiveness programs specifically for engineers. But you do have options to save money on your loans, whether through public service loan forgiveness, income-driven repayment plans, state programs aimed at professionals in your field, or student loan refinancing. Here, you can learn about some of the opportunities that exist.

Federal Loan Repayment Options

It’s true that many engineering majors go on to lucrative careers. But that doesn’t mean you necessarily earn a high salary right away. And you may choose to apply your skills at a government agency or nonprofit, or work in a different field altogether, earning less than expected.

The federal government offers four different repayment plans that cap your monthly payments at a percentage of your income in order to make your student loans affordable. Once you make the minimum number of payments required, the balance on your loans is eligible to be forgiven. Which plans you’re eligible for will depend on the types of federal student loans you have and when you borrowed them:

•  The Saving on a Valuable Education (SAVE) Plan was created to replace REPAYE. Payments on SAVE are capped at 10% of your discretionary income (in July 2024, that threshold will be 5% for undergraduate loans). Certain borrowers will have their balances forgiven after 10 years, while others will need to make payments for up to 20-25 years before receiving forgiveness. Only Direct Loans are eligible, excluding Direct PLUS loans to parents.

•  The Pay As You Earn (PAYE) plan also limits payments to 10% of your discretionary income. The balance can be forgiven after 20 years of payments. Again, only Direct Loans are eligible, except Direct PLUS loans to parents.

•  Under the Income-Based Repayment Plan (IBR Plan), your payments are limited to 10% of your discretionary income if you borrowed on or after July 1, 2014, or 15% if you borrowed before that date. In the former case, the debt can be forgiven after 20 years; in the latter, it can be wiped away after 25 years. Direct Loans are eligible (except Direct PLUS loans to parents), as well as most loans under the earlier Federal Family Education Loan Program.

•  The Income-Contingent Repayment Plan (ICR Plan) limits payments to 20% of discretionary income in most cases, and the rest can be forgiven after 25 years. Only Direct Loans are eligible, but this is the only program that also allows Direct PLUS loans to parents to qualify, as long as they are consolidated into a Direct Consolidation Loan.

If you aren’t sure which plan is best for you, ask your loan servicer for guidance. You can apply to enroll in an IDR program by filling out an Income-Driven Repayment Plan Request online or by asking your loan servicer for a paper form.

Taking advantage of programs that base your payment on your income can potentially make your monthly payment affordable in the long term if you don’t expect your salary to go up much.

Note: the amount forgiven under an income-driven repayment plan may be considered taxable income.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

Public Service Loan Forgiveness

There’s another way to take advantage of student loan forgiveness for engineers. If you work full-time for a government agency, non-profit, or certain other employers that serve the public interest, your federal loans might qualify for Public Service Loan Forgiveness. Those organizations include the military, as well as public safety, emergency management, and public health groups.

Under this program, once you make 120 qualifying payments (the equivalent of 10 years), the balance on your loans can be eligible for forgiveness. Make sure to submit an Employment Certification form annually or when you switch jobs. Note that only Direct Loans qualify for the program.

If you have older loans, you may be able to make them eligible by consolidating them through a Direct Consolidation Loan. You need to be enrolled in an income-driven repayment plan if you want to apply for Public Service Loan Forgiveness.

State Loan Assistance Programs for Engineers

Engineering is an in-demand profession. The U.S. Bureau of Labor Statistics estimates that 140,000 new engineering jobs will be created between 2016 and 2026. The fastest growing sub-specialties are civil, mechanical, and industrial engineering.

With this in mind, a couple of states have created programs that provide student loan assistance to people in the Science, Technology, Engineering, and Math (STEM) fields as incentive for professionals to reside there and pursue jobs in these areas.

For example, the Rhode Island Wavemaker Fellowship provides funds to college graduates who are pursuing a STEM-related career or starting a business in Rhode Island. Qualifying individuals receive a refundable tax credit certificate worth the value of their annual student loan burden for up to four years. Fellows are also invited to participate in various personal and professional programs and events.

The New Jersey STEM Loan Redemption Program incentivizes professionals to build careers in certain high-growth STEM fields in New Jersey. Program participants receive up to $2,000 to cover eligible student loan expenses each year, for up to four years, up to a maximum of $8,000. Half of each payment is funded by the New Jersey Higher Education Student Assistance Authority (HESAA), and the balance is matched by an equal contribution from the participant’s current employer.

When looking for student loan relief, steer clear of any scams promising fast, easy solutions at a hefty cost. Many of these companies end up filling out paperwork you could’ve completed yourself for free, or providing no services. Focus on official programs administered by federal or state governments, or by legitimate foundations or employers.


💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

Look to Your Employer

With employers looking to retain talent, some companies offer loan assistance for engineers. For example, PriceWaterhouseCoopers, the professional services firm, pays $1,200 in student loans for associates and senior associates, for up to six years. Its employees include software engineers, data engineers, cloud security engineers, DevOps engineers, and more.

Abbott, a health technology company, assists with student loans in a slightly more indirect way. For full-time and part-time workers who qualify for the company’s 401(k) plan, and who are paying at least 2% of their salary toward student loans, the company will deposit its 5% match in the 401(k) plan even if the employee doesn’t contribute anything.

This way, it helps employees avoid the tradeoff between paying off loans and saving for retirement. Abbott hires for roles like engineering director, senior manufacturing process engineer, mechanical engineer, and more.

These are just a few examples of companies that offer loan repayment help to engineers. It’s worth keeping a lookout for this benefit throughout your job search.

The Benefits of Student Loan Refinancing

The above options may not be enough: Perhaps you don’t live in the right place or work for the right employer, or maybe you earn too much for an income based plan to make sense. If you don’t qualify for loan assistance, or even if you do have some benefits but not all of your loans are covered, refinancing your student loans can be a good way to potentially save money.

You can refinance federal loans or private loans with a variety of lenders and other financial institutions, often nabbing a lower interest rate or reduced monthly payment in the process. (You may pay more interest over the life of the loan if you refinance with an extended term.) And you may get a better rate if you have a good credit score, earn a decent income, and have a solid employment history. It takes just a couple of minutes to see if you pre-qualify online.

Engineer a Better Future

Student loans represent an investment in a solid career path, but they can be a burden even for people in thriving professions. If you’re an engineer, check out what options are available to reduce your student loans, whether that’s loan forgiveness, assistance from your state or employer, or student loan refinancing.

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.

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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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22
2023

How Much Does a Pharmacist Make in a Year?

By | Building Your Career, Life & Career, relay | Comments Off on How Much Does a Pharmacist Make in a Year?

If you’re exploring career options, pharmacy might have popped up on your radar — and for good reason. Not only can pharmacists command a good salary, they also have job security, as the pharmaceutical industry is one that won’t vanish any time soon.

That said, how much does a pharmacist make? Is it worth all the trouble of going through pharmacy school to become one? Let’s find out.

What Are Pharmacists?

You’ve likely picked up a prescription or two at a pharmacy, but maybe you didn’t give any thought to the person behind the counter. This individual is your local pharmacist, and it’s their job to prepare and dispense prescription medications.

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Pharmacist Job Responsibility Examples

In addition to doling out prescription drugs, pharmacists also consult with patients, provide instructions for how to take medications, and help patients find low-cost medications. Some also give health screenings and immunizations.

Keep in mind, a pharmacist often needs to be outgoing, since their work involves speaking with patients throughout the day. If that’s not your personality, you may want to look into jobs for introverts.

💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

How Much Is a Starting Pharmacist Salary?

As with most professions, pharmacists tend to earn more money as they gain more experience. But what is a good entry-level salary for pharmacists?

Pharmacists with less than a year of experience generally earn, on average, about $54 per hour. That’s $112,320 per year.

Of course, how much you actually can earn depends on where you live, what your duties are, and whether you work for an independent pharmacy or a chain. It can also help to research the highest-paying jobs by state.

Recommended: Is a $100,000 Salary Good?

What Is the Average Salary for a Pharmacist?

Now that you see what starting salaries are for pharmacists, let’s address the next question: How much money does a more experienced pharmacist make?

Generally speaking, pharmacists are usually paid by the hour. A pharmacist with 10 years of experience earns an average of $67.05 per hour. That adds up to $139,464 per year.

What Is the Average Pharmacist Salary by State for 2023?

The amount you make will depend on where you live, among other factors. Here’s a look at the average pharmacist salaries by state, from highest to lowest.

State Salary
California $161,597
Oregon $155,710
Washington $149,466
New Hampshire $141,041
Nevada $140,869
Maine $139,517
Vermont $137,658
Delaware $136,276
Maryland $135,894
Connecticut $134,175
Alaska $134,044
Massachusetts $131,978
Rhode Island $131,960
New Jersey $131,698
New York $131,594
Pennsylvania $129,724
New Mexico $129,145
Wisconsin $128,918
Minnesota $128,502
Virginia $128,380
Hawaii $128,245
Arizona $126,174
Idaho $125,760
North Carolina $125,068
Michigan $124,768
Colorado $120,986
Illinois $120,887
Kansas $118,122
Ohio $117,573
Kentucky $117,448
Indiana $117,338
Missouri $116,513
Nebraska $116,366
Utah $116,009
South Carolina $115,570
West Virginia $115,339
Texas $115,089
North Dakota $114,359
Georgia $114,118
Tennessee $112,879
Wyoming $112,326
Montana $111,924
Iowa $110,405
Florida $109,106
Alabama $106,271
Mississippi $105,677
Louisiana $102,542
South Dakota $100,246
Oklahoma $98,951
Arkansas $89,660

Source: Zippia

Recommended: Pros and Cons of Raising the Minimum Wage

Pharmacist Job Considerations for Pay & Benefits

Where you live is one factor that can determine how much you earn as a pharmacist. Your on-the-job responsibilities may also play a role. For example, there are different job titles, and each has its own set of responsibilities, requirements, and salary ranges. Examples include:

•   Staff pharmacist

•   Pharmacy specialist

•   Clinical pharmacist

•   Pharmacy manager

•   Director of pharmacy

Some pharmacists may have roles and responsibilities beyond filling prescriptions, such as offering immunizations and health screenings. Some may be in charge of hiring and managing other employees. Some may work in traditional pharmacies, while others may work for companies focusing on chemotherapy, nuclear pharmacy, or long-term care.

Recommended: 25 High-Paying Trade Jobs in Demand

Pros and Cons of Pharmacist Salary

While being a pharmacist can be a rewarding job, there are potential drawbacks to keep in mind. Let’s look at some pros and cons.

Pros of Being a Pharmacist

Naturally, the high salary pharmacists tend to command may be one reason to consider this career path. Because many pharmacists get paid by the hour, they’ll be compensated fairly for their time even if they work more than 40 hours a week.

Another perk is that you may have a flexible schedule that allows you to work part-time or during certain hours. There could even be opportunities to work remotely, which may be useful if you’re working in a rural area.

You might also be able to open your own pharmacy instead of working for someone else. This brings freedom and flexibility to you as a business owner.

Finally, you’ll be a valuable member of your community, since it’s your job to help people on their path to wellness.

Cons of Becoming a Pharmacist

If becoming a pharmacist was easy, everyone would do it! For starters, you’ll need to have about six years of education after high school. And the cost of pharmacy school can range anywhere from $5,000 to $30,000 a year for an in-state public college, or $20,000 to $95,000 a year for a private school.

Depending on your financial situation, this could require you to tap into savings or take out student loans. (Creating a budget while you’re in school or just starting out can help you keep track of where your money is going. A money tracker app can help make the job easier.)

Another possible drawback? Some pharmacies may not guarantee a certain number of hours a week, and in that case, being paid hourly may not come with the big paycheck you’d expect.

Also keep in mind that some pharmacists work long hours, which can have a negative impact on your health and mental wellbeing.

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

If you’re looking for a rewarding and potentially lucrative job, becoming a pharmacist might fit the bill. You’ll help your local community get healthier, and depending on where you live and your level of experience, you could earn competitive pay, too.

FAQ

What is the highest pharmacist salary?

The state where pharmacists tend to earn the most is California. The average annual income of a pharmacist there is $161,597.

Is it hard to be hired as a pharmacist?

Becoming a pharmacist requires six years of education after high school. The workload is challenging, and pharmacies looking to hire generally have high expectations of applicants.

Photo credit: iStock/ADragan
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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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