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High school is often the first time you are able to make choices around your education. What language do you want to learn? What sport do you want to play? Would you rather learn to cook or take intro to psychology as your elective?

Choices can be fun, but they can also be overwhelming, especially when you’re trying to make the best choices to prepare for college.

Many students consider taking AP classes in high school, and for good reason. So let’s take a look at what AP classes are, what the benefits of taking them are, and how they can affect a student’s college experience.

What are AP Classes?

AP stands for “advanced placement” and AP classes prepare students for college, by giving them college-level work during high school. Their dedication is awarded accordingly, as they can earn college credit and placement by taking corresponding AP exams.

One of the primary motivators for enrolling in AP classes is they prepare students to take and pass AP exams. Students who earn qualifying AP scores on these exams can receive credits from most colleges and universities in the United States.

Depending on their high school’s offerings, students can enroll in one or more of the 38 AP classes that cover a variety of subject matters such as arts, languages, sciences, mathematics, and literature.

In order to enroll in an AP class, there may be prerequisite classes that you must take first. It’s recommended that even if students meet the required qualifications in order to take an AP class, that they consider carefully if they are prepared to take a college level course.

The three main benefits of taking AP classes in high school relate to saving money, becoming a more competitive college applicant, and preparing for success in college.


💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.

Benefit #1: Saving Money on College Tuition

AP classes will take up a lot of your time in high school but can also save time, and money, down the line in college. When you receive a high score on an AP exam, the college you attend in the future may give you credit that cancels out the need to take a similar college class.

Some schools may offer advanced placement instead, which allows you to effectively test out of introductory level courses in the specific subject, but may not be counted toward credit.

Policies vary by school, but the more AP exams you pass, the more credits you may be able to earn. These credits could allow you to skip classes which could save you a semester of attending an introductory English literature or Spanish class. Add up enough of these credits and you could potentially shave off an entire semester or more of your time spent at college.

Note that the policy on AP scores will vary from school to school, and not all schools offer credit for AP classes. Some schools may require a four or five on the AP exam in order to qualify for credit, while others may accept a three.

Generally, you can use AP credits to your financial advantage in two ways. You can either graduate early, which will save money on tuition, fees, and living expenses. Or, you can take lighter course loads across a four year period and can make time to take a part-time job or could add a second major or minor.

At the very least, you may be able to avoid paying for textbooks or lab fees in classes in which you have already mastered the subject matter.

Benefit #2: Making Your College Application More Competitive

When you apply for college, you typically work hard to put your best foot forward and to prove that you will thrive once you land on campus in the fall. College admissions departments carefully comb through transcripts, test scores, and personal essays to see if students will not only be a good fit at their school, but to ensure the student has every chance of succeeding once they enroll.

This is one of the reasons AP classes can be beneficial to high school students. When a student thrives in an AP class, they are essentially thriving in a college class. Before an AP student arrives at college, they will clearly understand what will likely be expected of them, how rigorous the course work can be, and what steps they need to take to succeed academically.

Alongside proving preparation, AP students could receive a bit of a grade point average (GPA) boost if they earn good grades. Some high schools, but not all, will give more weight to AP grades than normal ones. For example, receiving a B in an AP class may provide as many points towards your GPA as if you earned an A in the non-AP version of the class.

Recommended: 5 Ways to Start Preparing for College

Benefit #3: Prepare For College Better

Taking an AP course is akin to taking an actual college course, which can help you get a taste for college. If structured properly, an AP course should give you a preview of what skills you need to succeed in a college class and what the workload might look like.

Learning to manage time properly, developing strong research and analytic skills, and covering material more quickly in an AP class can be helpful preparation for the rigors of college life.

Taking AP classes can also help you identify your interests and passions which may lead you to the right college. Having a preview of what it would be like to study French, Psychology, or Chemistry in college can help guide you during the application process towards schools that have strong programs in your chosen area of interest.


💡 Quick Tip: Federal student loans carry an origination or processing fee (1.057% for Direct Subsidized and Unsubsidized loans first disbursed from Oct. 1, 2020, through Oct. 1, 2024). The fee is subtracted from your loan amount, which is why the amount disbursed is less than the amount you borrowed. That said, some private student loan lenders don’t charge an origination fee.

College Financing Options

When it comes to paying for college, there are a lot of different options available to students, including scholarships, grants, and federal financial aid.

But figuring out what you qualify for and how to apply can be overwhelming. A great first step is to complete the Free Application for Federal Student Aid (FAFSA). This will let you know what financial aid you are eligible for. For students and parents that need extra help covering the cost of attending college, student loans are a potential option. There are two types of student loans, federal and private.

Federal loans come with a fixed interest rate. With a subsidized federal loan, you don’t pay any interest while you are in school at least half-time. With an unsubsidized federal loan, interest begins to accrue right away (though you don’t have to start making payments until six months after you graduate).

Private student loans are available through banks, credit unions, and online lenders. Interest rates can be fixed or variable and will depend on the lender. Students that have excellent credit (or have cosigners who do) tend to get the lowest rates. Just keep in mind that private student loans may not offer the same protections, like income-based repayment plans, that come with federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

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SoFi Private Student Loans
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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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As any long-term investor in the market can attest, stocks rise and fall — influenced by a mix of economic trends and supply and demand.

Given the inherent volatility of stock values, there are periods when the market is down, and times when it’s gaining steam. So, how low can a stock go? Well, in some cases, stock prices can fall all the way to zero.

What happens when a stock goes to zero? Watching a stock in free fall can induce fear and panic in investors, causing some to sell their holdings. While most every investor aims to buy low and sell high, timing the stock market is very challenging and doesn’t guarantee that investors will see gains.

Sometimes when a stock goes down in value it can present an investment opportunity, but in other cases the stock could fall to zero and never recover. In the latter case, it may benefit investors to sell before the stock price falls all the way down to zero.

What Causes a Stock to Fall to Zero?

When a stock falls to zero, it doesn’t mean that the company is worth nothing. Some companies with very low stock values are still earning money or possess assets. And, some investors buy penny stocks that have extremely low prices.

What happens to a company when stock prices fall to zero? If a company continuously spends more money than it earns, and investors sell off the stock, ultimately, that can lead to the company going bankrupt. Most companies file for either Chapter 7 or Chapter 11 bankruptcy before their stock reaches $0.00.

Chapter 7 Bankruptcy

With a Chapter 7 bankruptcy filing, the company must sell off its assets until it can repay lenders and creditors. The order that stakeholders get paid is: creditors, bondholders, preferred stockholders, common stockholders.

This means that if the asset sale doesn’t bring in enough money to pay everyone, it’s likely that common shareholders won’t receive a dime. In this case, stockholders lose all the money they had invested in that stock.

Under Chapter 7, stock trading and all business activities must be put on hold.

Chapter 11 Bankruptcy

Under a Chapter 11 bankruptcy, the company negotiates loan terms with its creditors in order to avoid selling off assets. With Chapter 11, companies can still conduct business and their stock can be traded.

Once a company files for Chapter 11, it is likely that the stock will continue to fall, since many investors won’t have much faith in the business. Sometimes shares are canceled with a Chapter 11 filing. In that case, investors lose all the money they had put into the stock.

Even if a company files for bankruptcy before its stock falls to zero, their attempts to salvage the business may ultimately fail and the stock could become worthless. However, it can take a strong team and business model to go public and get listed on stock exchanges in the first place, so some bankrupt companies may have the potential to make a comeback.

Some companies with very low stock prices get acquired by larger companies before their stock falls to zero. Even a company with a low stock might have a promising product or service that a larger company is able to sell successfully. One example of this is when Alphabet acquired FitBit in 2021.


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

What Happens to a Company When Stock Prices Fall to Zero?

Some stock exchanges delist stocks if they fall below a certain level. For example, the New York Stock Exchange will remove a stock if its share price falls below $1 for 30 days in a row.

And, as mentioned above, if a company files for Chapter 7 bankruptcy, its stock will be delisted temporarily.

Can a stock go negative? Fortunately, it is not possible for a stock’s price to go into the negative territory — under zero dollars in value, that is.

Still, if an investor short sells or uses margin trading, they may lose more than they invested. For this reason, margin trading and short selling are risky investment strategies.

Short selling is when an investor predicts that a stock is going to decrease in value. So, rather than buying the stock, they ‘bet’ that it will go down. If the stock does in fact go down, they make money.

But, if the stock ends up increasing in value, they lose money. Potentially, an investor in this scenario could lose more money than they put into the initial short sell.

Margin trading is when an investor borrows money from the brokerage firm to trade stocks. If the investor makes a trade that doesn’t go in their favor, they can end up owing the brokerage firm money.

How Low Can a Stock Go?

Stock prices can fall all the way down to zero. That means the stock loses all of its value and a shareholder’s earnings are typically worthless. In this case, the investor loses what they invested in the stock.

Reasons for a Stock Losing Value Down to Zero

What makes a stock fall to zero? The are a number of reasons that may come into play, including:

•   Losses in the company’s revenue or earnings, especially if the losses are persistent

•   A perception in the market that the stock is overvalued

•   Management issues, shake-ups in the company’s leadership positions, scandal, fraud — in short, anything that can make investor sentiment turn negative

For investors, these are all signs a stock is underperforming and red flags to watch out for.

Types of Stocks Likely to Fall to Zero

What is a stock that falls to zero? Every stock comes with risks, but some are more risky than others. Besides companies on the brink of bankruptcy, there are certain types of businesses that have a higher chance of becoming worthless.

Knowing what to look for and researching and evaluating stocks before buying is key to building a resilient portfolio. Some of these higher risk stocks might include:

Companies With Weak Business Models

Even if a stock is currently performing well, it may fall in the future if the business model is fundamentally flawed. For this reason, many investors prefer to research a company’s practices, team composition, and business model before investing in its stock.

Penny Stocks

Stocks that trade below $5 are known as penny stocks. These low price stocks tend to be very volatile, as the companies that issue them have low or no profit.

Sometimes penny stocks can even turn out to be scams.

Buying the Dip

Rather than selling stocks when the market declines, some investors believe it can be a good idea to buy while the market is low. By buying the dip, as it’s known, investors pay less for stocks.

And, since these stocks still have the potential to go up in value as the market recovers after the decline, they can be preferred by long-term investors who may have more time to let their portfolio go back up in value.

However, if a company is going bankrupt or otherwise likely to fall to zero, it’s unlikely to offer a strong return on investment.

It’s also very difficult to time the market, so a trader might buy in when they think the market has hit bottom, only to watch it continue to go down.

Generally, building a diversified portfolio can offer higher returns on average over time than trying to time the market based on shorter-term trends or dips.

Examples of Stocks That Fell to Zero

There are two particularly infamous examples of stocks that fell to zero:

Enron

In the 1990s, Enron, an energy company, hid massive losses by using accounting tricks. At one point, its stock price was over $90. In 2001, analysts and investors became suspicious and began asking questions. That same year, the company reported huge losses, and its stock plummeted to $0.26 right before it declared bankruptcy.

World Com

This telecom company falsely inflated its cash flow and net income by listing expenses as investments to hide losses. Its stock price fell from more than $60 a share to less than $1 before the company declared bankruptcy in 2002.


💡 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 to Prevent Holding a Stock that’s Falling Lower

While it’s true that the market is impossible to predict, there are some measures that investors can take to protect themselves from losses — especially in the case of a stock spiraling towards zero. Below are some common preventative investment measures.

Stop Losses

Knowing when to sell a stock is important. Investors can set up a trade to automatically sell shares if a stock reaches a specific price. This type of trade is called a stop loss. It’s a strategy that could help prevent losses in the case of an individual stock or overall market drop.

There are multiple types of stop losses, including trailing stops and hard stops. Trailing stops move the stop level up as the stock rises in value, but stay in place if the stock falls. Hard stops are fixed at a specific price and will execute if the stock falls to that price.

Limit Orders

Limit orders allow investors to set the price at which they want to buy a stock. An investor selects the price and the number of shares they wish to buy. In practice, the order only executes if the stock then hits that price.

This is one way for traders to step away without worrying that they’ll be buying in at a price they didn’t want.

Put Options

A put option is a type of order that gives traders the option to sell or short-sell a specific amount of stock at a specific price, within a certain time frame. If a stock decreases in value in this case, the trader can still sell it at a higher price than it previously held.

Diversifying Asset Holdings

In an effort to prevent losses, investors may want to diversify their portfolios into a mix of non-correlated assets — dividing their holdings between assets at a higher and lower risk of fluctuating in value.

In a diversified portfolio, if one asset class decreases in value, the other types may not. Over time, the ups and downs of each asset could possibly balance the losses in each.

Setting Up a Stock Portfolio

By researching companies and setting up a portfolio according to one’s personal risk tolerance, and then keeping tabs on the assets in that portfolio to monitor their performance, it may be possible to help hedge against a stock sinking down to zero.

FAQ

At what point does a stock become worthless?

A stock becomes worthless when it falls to zero and has no value. In this case, an investor loses the money they invested in the stock.

How low can a stock go before being removed?

Some stock exchanges delist stocks if they fall below a certain level. The New York Stock Exchange will remove a stock if its share price falls below $1 for 30 days in a row, for instance.

Do you owe money if a stock goes negative?

No. A stock price can’t go negative, or, that is, fall below zero. So an investor does not owe anyone money. They will, however, lose whatever money they invested in the stock if the stock falls to zero.

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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.

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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