Mar
25
2025

Understanding Palladium Investment

By | Growing Wealth, invest, Investing, Terminology, Tools & Calculators | Comments Off on Understanding Palladium Investment

Palladium investment is gaining popularity as investors seek precious metal options beyond gold and silver. That’s in part because alternative investments, such as precious metals, can provide portfolio diversification and the potential for returns. Though there are significant risks to be aware of, too.

Palladium investing may be attractive to some investors due to its relative rarity and affordability compared to gold, and it’s fairly easy to buy and sell. But it’s important to understand how this asset class works before diving in. Let’s look at how to invest in palladium and the pros and cons of holding precious metals in a portfolio.

Key Points

•   Palladium prices are influenced by supply and demand, with major production in Russia and Africa.

•   Significant demand for palladium comes from the automotive industry, especially for catalytic converters.

•   Major companies in the palladium industry include Norilsk Nickel, Anglo American Platinum, and Sibanye-Stillwater.

•   Investment options in palladium include physical bars, coins, ETFs, futures, and shares in mining companies.

•   Investing in palladium offers diversification and inflation protection but involves storage costs, price volatility, and liquidity risks.

What Is Palladium?


Palladium is a silvery-white element that assumes a solid form at room temperature but can be heated to a liquid state. Part of the platinum group of metals, palladium was first discovered in 1803 by William Hyde Wollaston, an English chemist. It was named after the asteroid Pallas, which was discovered around the same time.1

Common uses for palladium include:

•   Watch springs

•   Surgical instruments

•   Dental fillings and crowns

•   Electrical contacts

•   Catalytic converters

Palladium can also be used to make jewelry and forms white gold when alloyed with gold.

Recommended: What Are Alternative Investments?

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The Palladium Market


Interest in palladium investments has grown in recent years as demand for it remains steady.

Supply and Demand Dynamics


Supply and demand can influence pricing for any good, including palladium and other precious metals. Palladium’s relative scarcity influences the supply side, while demand is determined by the market. Several factors affect the availability of palladium and demand for it, including:

•   Production. In its pure form, palladium is most often found in Russia and Africa, with smaller concentrations in Australia, Canada, the U.S., and Finland. Slowdowns in production can affect supply and in turn, drive up prices if demand remains high.2

•   Recycling. Recycling can re-introduce palladium into the supply. When recycling increases, the supply can increase to help meet demand and keep prices stable.

The largest demand for palladium comes from the automobile industry, according to the World Platinum Investment Council (WIPC). An uptick in global vehicle production in 2023, in particular, sparked a surge in demand for palladium which led to a supply deficit. However, that deficit is on track to become a surplus by 2026 thanks to recycling, according to the WIPC.3

Key Players in the Palladium Industry


Several companies operate in the palladium market, though one claims the title as the largest producer. Norilsk Nickel (Nornickel) is a global leader in palladium production and mining. It holds the largest position for palladium and nickel production in the world market and is also a key producer of platinum, rhodium, and copper.4

Other top palladium producers include:

•   Anglo American

•   Platinum, LTD.

•   Sibanye-Stillwater

•   Impala Platinum Holdings, LTD.

•   Vale

These companies mine palladium along with other platinum group metals, though on a smaller scale than Nornickel.

Investment Options for Palladium


Investing in precious metals like palladium is not one-size-fits-all and there are several ways to do it. The most common ways to own palladium as an investment include:

•   Buying and selling palladium bars

•   Trading palladium coins

•   Investing in palladium exchange-traded funds (ETFs)

•   Trading palladium futures

The first two options may be preferable if you’d rather make a tangible investment in precious metals. Palladium bars or coins are relatively easy to buy, though they do require proper storage to preserve the metal’s integrity.

Palladium ETFs offer exposure to a basket of investments in a single vehicle, without requiring any type of physical holding. Palladium futures, meanwhile, are speculative investments that can offer higher returns but carry more risk.

Factors Influencing Palladium Prices


Palladium prices can fluctuate based on a variety of factors, starting with supply and demand. When supply shrinks and demand increases, that can result in a higher price. As of January 23, 2025, the price was around $1,000. That’s significantly below the average closing price of $2,388.36 registered in 2021.9

Supply and demand can, in turn, be affected by factors that affect palladium pricing. Geopolitical events that disrupt production in countries where palladium mining has a sizable footprint, for instance, can send prices soaring if there’s a significant reduction in available supply.

The global economy also plays a part. If the global economy is strong overall, that can lead to more demand for palladium and potentially higher prices. When the global economy begins to slow, on the other hand, prices may fall if demand declines.

Recommended: Why Alternative Investments?

Advantages of Investing in Palladium


Palladium and precious metals in general can offer some advantages to investors. Here are some of the best reasons to consider palladium investment.

•   Diversification. Alt investments like palladium can add a degree of diversification to your portfolio.

•   Accessibility. Some alternative investments, like classic cars, often have a higher barrier to entry. Investing in palladium, by contrast, is relatively easy and there are multiple ways to do it.

•   Inflationary protection. Palladium and precious metals are considered to be an inflationary hedge, which can help protect your purchasing power if consumer prices rise.

You can even use palladium to fund your retirement through a self-directed IRA. Along with gold, silver, and platinum, it’s one of four precious metal investments the IRS allows with these tax-advantaged accounts.

Risks Associated With Palladium Investment


Palladium investing is not risk-free and it’s important to consider the potential downsides before adding precious metals to your portfolio. Here are some of the most significant risks associated with owning palladium as an investment.

•   Storage costs. If you’re buying palladium bars or coins you’ll need to store them properly, which may require an additional investment of both time and money.

•   Pricing volatility. Palladium pricing is highly sensitive and a change in market conditions or a geopolitical event could result in a substantial shift overnight.

•   Liquidity. Precious metals are liquid assets since they can easily be sold for cash, but the price you get may be below your expectations depending on the timing of the transaction and the overall condition of the market.

The initial investment for palladium bars or coins is also a consideration. If you have $1,000 to invest you’d have to consider carefully whether you’d rather use that to buy one palladium bar, or invest in 10 shares of a palladium ETF that’s trading for $100.

💡 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.

How to Buy and Store Physical Palladium


If you want to invest in physical palladium you can purchase bars or coins from a reputable dealer. You may buy palladium through a local bullion dealer that sells palladium bars and coins, or from an online company.

The advantage of buying locally is being able to physically see what you’re buying before you make a purchase. You can ask questions and should you decide to buy, walk away with your bars or coins in hand without paying a shipping fee. If you plan to sell your bars or coins, you could take them back to the same dealer to get an offer.

With an online dealer, you’re limited to reading descriptions and viewing pictures of the coins or bars you plan to buy. Once you’re ready to invest, you’ll have to arrange to send payment and pay shipping costs to transport your bars or coins to you.

When it’s time to store your coins or bars you may choose to do so at home or in a safe deposit box at your bank. If you store your palladium at home you may want to invest in a specially-made box that’s designed to hold precious metals and keep it inside a fireproof safe.

Should you go the bank route, note that safe deposit boxes and their contents are not FDIC-insured.

Palladium ETFs and Mutual Funds

Palladium ETFs and mutual funds offer exposure to palladium and precious metals investments in a single basket. Exchange-traded funds trade on an exchange like stocks while mutual funds settle once per day.

If you’re considering a palladium ETF, look at the underlying investments to know what you’ll own. For example, Aberdeen Physical Palladium Shares ETF (PALL) holds palladium bars in a secure vault so you can own physical precious metals indirectly. Other palladium ETFs, meanwhile, may invest in palladium mining companies instead.

Aside from holdings, consider the expense ratio, which is the price you’ll pay annually to own a palladium ETF or mutual fund. Also, look at the fund’s history to see how its price and return profile have trended over the years. Just remember that past history is not an indicator of future performance.

Investing in Palladium Mining Companies


If you’re comfortable trading individual stocks you might trade shares of palladium mining companies. Trading stocks versus investing through an ETF or mutual fund has pros and cons.

You’ll need to decide how much to invest and which companies to invest in, based on their performance outlook, risk profile, and share price. You’ll also need to have a strategy for holding those stocks. Ask yourself:

•   How long will you hold the shares?

•   What are the tax implications of selling those shares at a gain?

•   How much of your total portfolio will you allocate to palladium and/or other precious metals?

You’ll need a brokerage account to buy and sell stock shares online but it’s relatively easy to get started. The first step is finding a brokerage that offers access to palladium stocks or futures. From there, you’ll just need to set up an account to start investing.

Palladium vs. Other Precious Metals


Palladium has one notable characteristic working in its favor compared to other precious metals. It’s much rarer than gold or silver, which can potentially drive up the price through imbalances in supply and demand.

The downside, however, is that palladium prices tend to be more volatile than gold or silver prices. That means you’re trading off a certain amount of stability and taking more risk with palladium investments.

Liquidity is also a concern, as gold and silver investments may be easier to sell on the fly. Palladium, though gaining ground as an investment, is still a relatively new player compared to gold and silver. Investors who are looking to buy precious metals may bypass palladium for investments they perceive as being more price-stable.

Recommended: Understanding the Gold/Silver Ratio

The Takeaway


Investing in palladium may be new territory for you and if it is, it’s important to do your research beforehand. Specifically, you should have a good understanding of what can affect palladium prices and how its risk/reward profile aligns with your risk tolerance.

If you’re brand-new to online investing, consider looking for a brokerage that charges minimal fees and offers an easy, online account setup. The sooner you start investing, the sooner you can get on track with your financial goals. In the meantime, check out our guide to alternative investments to learn more about building a portfolio with precious metals.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

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FAQ

What industries drive the demand for palladium?

The automotive industry is the biggest demand driver for palladium, according to the WPIC. Vehicle manufacturers use palladium to make catalytic converters which help power cars and trucks.

How does palladium compare to other precious metals as an investment?

Palladium has a higher scarcity factor than gold, silver, and other precious metals. When supply is low relative to demand, prices may soar. The biggest risk with palladium investments, however, is price volatility. That’s something to consider if you’re debating how to invest in gold vs. palladium or other precious metals.

What are the ways to invest in palladium?

You have several possibilities for owning palladium as an investment. You might choose to buy palladium bars or coins and store them, or you could invest online with palladium ETFs or mutual funds. Trading individual shares of palladium mining companies is also an option.

About the author

Rebecca Lake

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.


Photo credit: iStock/Delmaine Donson

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.


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

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

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25
2025
Learn 7 Strategies to Double Your Money

Learn 7 Strategies to Double Your Money

By | Growing Wealth, invest, Investing, Terminology | Comments Off on Learn 7 Strategies to Double Your Money

Figuring out how to double your money with investments often hinges on striking the right balance between risk and reward. Your personal risk tolerance and goals can influence how you invest and the returns your portfolio generates.

However, doubling your money is a reasonable goal, especially if you’re willing to wait for your money to grow. And that’s a big variable to keep in mind: Time. If you’re interested in doubling your money and growing wealth for the long-term, there are several investing strategies to consider.

Investing Strategies to Double Your Money

1. Get to Know the Rule of 72

The rule of 72 can be a helpful guideline for answering this question: How long to double your money?

If you’re not familiar with this investing rule, it’s not complicated. It uses a simple formula to estimate how long doubling your money might take, based on your annual rate of return. You divide 72 by your annual return to get the number of years you’ll need to wait for your investment to double.

So, for example, if you have an investment that generates a 5% annual return, it would take around 14.5 years to double it. On the other hand, an investment that’s generating a 12% annual return would double in about six years.

The rule of 72 doesn’t predict how an investment will perform. But it can give you an idea of how quickly (or slowly) you can double your money, based on the returns you’re getting each year. Just keep in mind that the rule’s accuracy tends to decrease as the rate of return increases, so it’s more of a guideline than a hard-and-fast rule.


💡 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.

2. Leverage Your Employer’s Retirement Plan

One way to attempt to double your money through investing may be through your workplace retirement plan. If your employer offers a matching contribution to the money you’re deferring from your paychecks, that’s essentially free money for you.

Employer matching contributions are low-hanging fruit, in that you don’t need to change your investment strategy to take advantage of them. All that’s required is contributing enough of your salary to your employer’s retirement plan to qualify for the match.

The matching formula that companies use varies, but some companies offer a dollar-for-dollar match, meaning that the money you put into a 401(k) would automatically double when you receive your match. Keep in mind that some companies use a vesting schedule, meaning that you have to work at the company for a certain period of time before you get to keep all the employer contributions.

Aside from potentially helping to double your money, investing your 401(k) or a similar qualified retirement plan can also yield tax benefits. Contributions made with pre-tax dollars are deducted from your taxable income, which could lower your annual tax bill.

3. Diversify Strategically

Diversification means spreading your money across different investments to create a portfolio that will meet your needs for both risk and return.

As a general rule of thumb, riskier investments like stocks have the potential to generate higher returns. More conservative investments, such as bonds, tend to generate lower returns but there’s less risk that you’ll lose money on the investment.

If you want to double your money, then it’s important to pay attention to diversification and what that means for your return on investment. For instance, if you’re investing heavily in stocks then you could see greater returns but you might experience deeper losses if the market takes a hit. Playing it too safe, on the other hand, could cause your portfolio to underperform.

Also, keep in mind that there are many types of investments besides stocks, mutual funds and bonds. Real estate, stock options, futures, precious metals and hedge funds are just some stock and bond alternatives you could use to build a portfolio. Understanding their risk/reward profiles can help you decide what to invest in if you’re focused on doubling your money.


💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.

4. Consider Buying When Others Are Selling

The stock market is cyclical and you’re guaranteed to experience ups and downs during your investing career. How you approach the down periods can impact your ability to double your money when the market goes up again.

When the market drops, some investors start selling off stocks or other investments to avoid losses. But if you’re comfortable taking risks, the sell-off could present an opportunity to buy the dip.

If you can purchase stocks at a discount during periods of volatility when other investors are selling, you could double your money when those same stocks increase in value again. But again, making this strategy work for you comes down to knowing how much risk is acceptable to you.

5. Commit for the Long Term

There are different investment philosophies you can adopt. For example, traders regularly buy and sell investments to try and get quick wins from the market. A buy-and-hold strategy takes a different approach, but it could pay off if you’re trying to double your money.

Buy-and-hold investing involves buying an investment and holding onto it for the long-term. The idea is that during that holding period, the investment will grow in value so you can sell it at a sizable profit later.

This is a passive investment strategy that relies on patience and time to increase your portfolio’s value. The longer you have to invest, the more you can capitalize on the power of compounding gains, or gains you earn on your gains.

If you’re using a buy-and-hold strategy with a value investing strategy, you could potentially double your money or more if your investments meet your expectations. Value investing means investing in companies that you believe the market has undervalued.

This strategy takes a little work since you have to learn how to understand the difference between a stock’s market value and its intrinsic value. But if you can find one of these bargain hidden gems and hold onto it, you could reap major return rewards later when you’re ready to sell.

6. Step Up Your Investment Contributions

Another simple strategy to double your money is to invest more. Assuming your portfolio is performing the way you want and need it to to reach your goals, doubling your investment contributions could be a relatively easy way to boost your returns.

If you can’t afford to put big chunks of money into the market all at once, there are ways to increase your investments gradually. For instance, you could start building a portfolio with fractional shares and increase your contributions by a few dollars each month.

If you’re investing your 401(k) at work, you could ask your plan administrator about raising your contribution rate annually. For example, you might be able to automatically bump up salary deferrals by one or two percent each year. And if that coincides with a pay raise you may not even miss the extra money you’re contributing.

7. Focus on Tax Efficiency

Minimizing tax liability is another opportunity to stretch your investment dollars. There are different ways to do that inside your portfolio.

Investing in your retirement plan at work is an obvious one, so if you aren’t doing that yet you may want to consider getting started. Remember, the longer you have to invest, the more time your money has to grow.

If you don’t have a 401(k) or a similar plan at work, you could open a traditional or Roth Individual Retirement Account (IRA) instead. A traditional IRA allows for tax-deductible contributions, meaning you get an upfront tax break. Then, you pay ordinary income tax on that money when you withdraw it in retirement.

Roth IRAs aren’t tax-deductible, since you fund them with after-tax dollars. The upside of that, however, is that qualified withdrawals in retirement are 100% tax-free.

A taxable brokerage account is another way to invest, without being subject to annual contribution limits the way you would with a 401(k) or IRA. The difference is that you’ll pay capital gains tax on your investment growth.

Paying attention to asset location can help with maximizing tax efficiency across different investment accounts. For example, exchange-traded funds can sometimes be more tax-efficient than other types of mutual funds because they have lower turnover. That means the assets in the fund aren’t bought or sold as frequently, so there are fewer taxable events.

Keeping ETFs in a taxable account while putting less tax-efficient investments into a tax-advantaged account, such as a 401(k) or IRA, could help with doubling your money if it means reducing the taxes you pay on investment gains.

The Takeaway

Learning how to double your money can mean taking a slow route or a quicker one, but it all comes down to how much risk you’re comfortable with and how much time you have to invest. One of the keys to growing your investments is being consistent and that’s where automated investing can help.

There are numerous strategies and tactics that you can try to leverage to your advantage. But ultimately, whether you’re able to double your money will likely come down to how much you’re willing to risk, how much time you have on your side, and probably a little bit of luck.

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).

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

Photo credit: iStock/South_agency

About the author

Rebecca Lake

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.


SoFi Invest®

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

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

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

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


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

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Mar
25
2025

REITs vs. REIT ETFs: What’s the Difference?

By | invest, Investing, Terminology | Comments Off on REITs vs. REIT ETFs: What’s the Difference?

Both real estate investment trusts (REITs) and exchange-traded funds (ETFs) that invest in REITs offer some benefits of real estate investing, without having to own any properties directly. The main differences between a real estate ETF vs. REIT lie in how they’re structured, dividend payouts, taxes, and the fees investors might pay to own them.

Also, REITs are considered alternative investments, which means they tend not to move in sync with traditional investments like stocks and bonds.

Key Points

•   REITs and REIT ETFs offer benefits of real estate investing without direct property ownership.

•   Differences between REITs and REIT ETFs include structure, dividend payouts, taxes, and fees.

•   REITs are considered alternative investments and may not move in sync with traditional investments.

•   REITs generate income through rents, while REIT ETFs own a collection of REIT investments.

•   Investors can buy and sell shares of REIT ETFs on stock exchanges, while REITs can be publicly traded, non-traded, or private.

Overview of REITs

A real estate investment trust is a legal entity that owns and operates income-producing properties. REITs can hold a single property type or multiple property types, including:

•   Hotels and resorts

•   Self-storage facilities

•   Warehouses

•   Retail space, including shopping centers

•   Apartment buildings or multi-family homes

•   On-campus housing

•   Assisted living facilities

REITs that own and manage properties typically generate most, if not all, of their income through rents. Some REITs may also invest in mortgages and mortgage-backed securities. REITs that invest in mortgages can collect interest on those loans.

There are two conditions to qualify for a REIT. A company must:

•   Derive the bulk of its income and assets from real estate-related activities

•   Pay out at least 90% of dividends to shareholders

Companies that meet these conditions can deduct all of the dividends paid to shareholders from corporate taxable income.

💡 Quick Tip: Alternative investments provide exposure to sectors outside traditional asset classes like stocks, bonds, and cash. Some of the most common types of alt investments include commodities, real estate, foreign currency, private credit, private equity, collectibles, and hedge funds.

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.

What Is a REIT ETF?

An exchange-traded fund or ETF is a pooled investment vehicle that shares some of the features of a mutual fund but trades on an exchange like a stock. A REIT ETF is an exchange-traded fund that owns a basket or collection of REIT investments.

While REITs own properties, REIT ETFs do not. REIT ETFs have a fund manager who oversees the selection of securities held in the fund. The fund manager also decides when to sell off fund assets, if necessary.

A REIT ETF may be actively or passively managed. Actively managed ETFs often pursue investment strategies that are designed to beat the market. Passively managed ETFs, on the other hand, aim to mimic the performance of an underlying market benchmark or index.

Recommended: What Is a Dividend?

How REIT ETFs Work

REIT ETFs work by allowing investors to gain exposure to a variety of real estate assets in a single investment vehicle. For example, a REIT may hold:

•   Stocks issued by REITs

•   Other real estate stocks

•   Real estate derivatives, such as options, futures, or swaps

Investors can buy shares of a REIT ETF on a stock exchange and sell them the same way. Like other ETFs, REIT ETFs charge an expense ratio that reflects the cost of owning the fund annually. Expense ratios for a REIT ETF, as well as performance, can vary from one fund to the next.

REIT ETFs pay dividends to investors, which may be qualified or non-qualified. The fund may give investors the option to reinvest dividends vs. collecting them as passive income. Reinvesting dividends can allow you to purchase additional shares of a fund, without having to put up any money out of pocket.

A REIT ETF might track the performance of the MSCI US Investable Market Real Estate 25/50 Index, which offers investors access to multiple REIT property sectors, including:

•   Data centers

•   Health care

•   Hotels and resorts

•   Office space

•   Industrial

•   Real estate

•   Retail

•   Telecom

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

What’s the Difference between REITs and REIT ETFs?

REITs and REIT ETFs both offer opportunities to invest in real estate, without requiring investors to be hands-on in managing property. There are, however, some key differences to know when considering whether to invest in a REIT vs. REIT ETF.

Structure

REITs are most often structured as corporations, though they can also be established as partnerships or limited liability companies (LLCs). The Internal Revenue Service (IRS) requires REITs to have a board of directors or trustees who oversee the company’s management. As mentioned, REITs must pay out 90% of dividends to shareholders to deduct those payments from their corporate taxable income.

A REIT may be categorized in one of three ways, depending on what it invests in.

•   Equity REITs own properties that generate rental income.

•   Mortgage REITs focus on mortgages and mortgage-backed securities.

•   Hybrid REITs hold both properties and mortgage investments.

REIT ETFs are structured similarly to mutual funds, in that they hold multiple securities and allow investors to pool funds together to invest in them. The fund manager decides which investments to include and how many securities to invest in overall.

Both REITs and REIT ETFs are structured to pay out dividends to shareholders. And both can generate those dividends through rental income, mortgage interest, or a combination of the two. The difference is that structurally, a REIT ETF is a step removed since it doesn’t own property directly.

Investment Style

REITs and REIT ETFs can take different approaches concerning their investment style. When comparing a REIT vs. REIT ETF, it’s helpful to consider the underlying investments, fund objectives, and management style.

An actively managed REIT, for example, may generate a very different return profile than a passively managed REIT ETF. Active management can potentially result in better returns if the REIT or REIT ETF can beat the market. However, they can also present more risk to investors.

Passive management, on the other hand, typically entails less risk to investors as the goal is to match the performance of an index or market benchmark rather than exceed it. Fees may be lower as well if there are fewer costs incurred to buy and sell securities within the fund.

How They’re Traded

Individual REITs can be publicly traded, public but non-traded, or private. Publicly traded REITs are bought and sold on stock market exchanges and are regulated by the Securities and Exchange Commission. Public non-traded REITs are also subject to SEC regulation but they don’t trade on exchanges.

Private REITs, meanwhile, are not required to register with the SEC, nor are they traded on exchanges. These types of REITs are most often traded by institutional or accredited investors and may require higher buy-ins.

REIT ETFs trade on an exchange like a stock. You can buy shares of a REIT or REIT ETF through your brokerage account. If you decide you’re no longer interested in owning those shares you can sell them on an exchange. Unlike traditional mutual funds, share prices for REIT ETFs can fluctuate continuously throughout the day.

The Takeaway

Real estate can be an addition to a portfolio for investors who are interested in alternative investments. Whether it makes sense to choose a real estate ETF vs. REIT, or vice versa, can depend on your short and long-term financial goals, as well as your preferred investment style.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.


Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Do REIT ETFs pay dividends?

REIT ETFs pay dividends to investors. When considering a REIT ETF for dividends, it’s important to assess whether they’re qualified or non-qualified, as that can have implications for the tax treatment of that income.

What are the risks of investing in REITs?

REITs are not risk-free investments, and their performance can be affected by a variety of factors, including interest rates, shifts in property values, and limited liquidity. In some cases, the dividend payout from a REIT can provide steady returns, but this is not always the case, as real estate conditions can fluctuate.

Do REITs have fees?

REITs can charge a variety of fees, which may include upfront commissions, sales loads, and annual management fees. REIT ETFs, meanwhile, charge expense ratios and you may pay a commission to buy or sell them, depending on which brokerage you choose. Evaluating the fees for a REIT or REIT ETF can help you better understand how much of your returns you’ll get to keep in exchange for owning the investment.

About the author

Rebecca Lake

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.


Photo credit: iStock/Maks_Lab

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.


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.


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.
Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

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


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Mar
25
2025
What Is Regulation T (Reg T) & What Does It Do?

Regulation T (Reg T): All You Need to Know

By | Growing Wealth, invest, Investing, Terminology | Comments Off on Regulation T (Reg T): All You Need to Know

Regulation T, or “Reg T” for short, is a Federal Reserve Board regulation governing the extension of credit from brokerage firms to investors (also called margin accounts). In margin trading, Regulation T is used to determine initial margin requirements. An investor who fails to meet the initial margin requirements may be subject to a Reg T call, which is one type of margin call.

Understanding Regulation T and Regulation T calls is important when trading securities on margin.

What Is Regulation T?

Regulation T is issued by the Federal Reserve Board, pursuant to the 1934 Securities Exchange Act. The purpose of Reg T is to regulate how brokerage firms and broker dealers extend credit to investors in margin trading transactions. Specifically, Regulation T governs initial margin requirements, as well as payment rules that apply to certain types of securities transactions.

Margin trading means an investor borrows money from a brokerage to make investments. This allows the investor to potentially increase their investment without putting up any additional money out of pocket. For example, an investor may be able to put up $10,000 to purchase 100 shares of stock and borrow another $10,000 on margin from their brokerage to double their investment to $20,000.

Regulation T is central to understanding the inner workings of margin accounts. When someone is buying on margin, the assets in their brokerage account serve as collateral for a line of credit from the broker.

The borrowed amount is repaid with interest. Interest rates charged on margin accounts vary according to the brokerage and the amount borrowed. Trading on margin offers an opportunity to amplify returns, but poses the risk of steeper losses as well.

Increase your buying power with a margin loan from SoFi.

Borrow against your current investments at just 11%* and start margin trading.

*For full margin details, see terms.

💡 Quick Tip: When you trade using margin, you’re using leverage — i.e. borrowed funds that increase your purchasing power. Remember that whatever you borrow you must repay, with interest.

How Reg T Works

Regulation T works by establishing certain requirements for trading on margin. Specifically, there are three thresholds investors are required to observe when margin buying, one of which is directly determined by Regulation T.

Here’s a closer look at the various requirements to trade on margin:

•   Minimum margin. Minimum margin represents the amount an investor must deposit with their brokerage before opening a margin account. Under FINRA rules, this amount must be $2,000 or 100% of the purchase price of the margin securities, whichever is less. Keep in mind that this is FINRA’s rule, and that some brokerages may require a higher minimum margin.

•   Initial margin. Initial margin represents the amount an investor is allowed to borrow. Regulation T sets the maximum at 50% of the purchase price of margin securities. Again, though, brokerage firms may require investors to make a larger initial margin deposit.

•   Maintenance margin. Maintenance margin represents the minimum amount of margin equity that must be held in the account at all times. If you don’t know what margin equity is, it’s the value of the securities held in your margin account less the amount you owe to the brokerage firm. FINRA sets the minimum maintenance margin at 25% of the total market value of margin securities though brokerages can establish higher limits.

Regulation T’s main function is to limit the amount of credit a brokerage can extend. It’s also used to regulate prohibited activity in cash accounts, which are separate from margin accounts. For example, an investor cannot use a cash account to buy a stock then sell it before the trade settles under Reg T rules. It may be beneficial to review the basics of leveraged trading to deepen your understanding, too.

Why Regulation T Exists

Margin trading can be risky and Regulation T is intended to limit an investor’s potential for losses. If an investor were able to borrow an unlimited amount of credit from their brokerage account to trade, they could potentially realize much larger losses over time if their investments fail to pay off.

Regulation T also ensures that investors have some skin in the game, so to speak, by requiring them to use some of their own money to invest. This can be seen as an indirect means of risk management, since an investor who’s using at least some of their own money to trade on margin may be more likely to calculate risk/reward potential and avoid reckless decision-making.

Example of Reg T

Regulation T establishes a 50% baseline for the amount an investor is required to deposit with a brokerage before trading on margin. So, for example, say you want to open a margin account. You make the minimum margin deposit of $2,000, as required by FINRA. You want to purchase 100 shares of stock valued at $100 each, which result in a total purchase price of $10,000.

Under Regulation T, the most you’d be able to borrow from your brokerage to complete the trade is $5,000. You’d have to deposit another $5,000 of your own money into your brokerage account to meet the initial margin requirement. Or, if your brokerage sets the bar higher at 60% initial margin, you’d need to put up $6,000 in order to borrow the remaining $4,000.

Why You Might Receive a Regulation T Call

Understanding the initial margin requirements is important for avoiding a Regulation T margin call. In general, a margin call happens when you fail to meet your brokerage’s requirements for trading in a margin account. Reg T calls occur when you fall short of the initial margin requirements. This can happen, for instance, if you’re trading options on margin or if you have an ACH deposit transaction that’s later reversed.

Regulation T margin calls are problematic because you can’t make any additional trades in your account until you deposit money to meet the 50% initial margin requirement. If you don’t have cash on hand to deposit, then the brokerage can sell off securities in your account until the initial margin requirement is met.

Brokerages don’t always have to ask your permission to do this. They may not have to notify you first that they intend to sell your securities either. So that’s why it’s important to fully understand the Reg T requirements to ensure that your account is always in good standing with regard to initial margin limits.

💡 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.

The Takeaway

Regulation T is used to determine initial margin requirements — i.e. the amount of cash an investor must keep available relative to the amount they’ve borrowed. Margin trading may be profitable for investors, though it’s important to understand the risks involved. Specifically, investors need to know what could trigger a Regulation T margin call, and what that might mean for their portfolios.

An investor who fails to meet the initial margin requirements may be subject to a Reg T call, which is problematic because they are restricted from making additional trades until they deposit the 50% initial margin requirement. If the investor doesn’t have cash on hand to deposit, then the brokerage can sell off securities in the account until the initial margin requirement is met.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

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

About the author

Rebecca Lake

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.


Photo credit: iStock/loveguli

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
*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 $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Mar
25
2025

What Are Blue Chip Stocks?

By | Financial Independence, Growing Wealth, invest, Investing, Terminology | Comments Off on What Are Blue Chip Stocks?

Blue chip stocks are generally issued by large, well-established companies that have a history of reliable growth. These companies are often financially sound, they’re typically considered lower risk; many blue chip stocks also pay dividends.

In other words, blue chip stocks are the big, stable ocean liners of the equity markets. Dazzling outperformance is not what blue chip investors are after. Rather, you may want to consider these large-cap stocks in the slow-but-steady corner of your equity allocation, as part of your diversification strategy.

Key Points

•   Blue chip stocks tend to be bigger, more stable companies, often with a long history and slow but steady growth.

•   Because blue chip companies are typically past their rapid growth phase, many can afford to distribute some of their profits to shareholders via dividends.

•   The advantage of investing in blue chips is that they have a low risk profile, and may provide stability in a portfolio — potentially with more growth than fixed-income securities.

•   For some investors, the disadvantage of blue chips is that these companies tend to be in the low-and-slow category of returns.

What Is a Blue Chip Stock?

First, let’s answer the obvious questions: Why blue chips? The origin of the term “blue chip stocks” is believed to originate with the game of poker, where traditionally the blue chips have the highest value.

While there is no fixed definition for blue chips, generally speaking blue chip stocks are known for being large, stable, and reliable. Blue chip companies can also share some other characteristics.

Common Traits of a Blue Chip Stocks

•   They’re well-known. Blue-chip stocks can be found in almost any sector, from consumer goods to big pharma. Companies like Morgan Stanley, Disney, Oracle, Coca-Cola, and Pfizer are considered blue chip stocks.

•   They’re industry leaders. Most blue chip stocks are not newcomers. Rather they’ve demonstrated a history of innovation as well as financial stability, which makes them well-established industry leaders, and a potential anchor for a defensive investing strategy.

•   They’re big. Many blue chip companies have a market cap of $10 billion or more, and many are larger. Market capitalization is a measure of a company’s value, and it’s calculated by multiplying the share price by the number of shares outstanding.

•   They’re well established. Most blue chip stocks are not newcomers. Rather they’ve demonstrated a history of financial stability, which can make them an important part of a defensive investment strategy.

•   They have a long track record. Owing to their longer histories, many blue chip stocks have overcome market challenges, but that does not make them “safe” investments. But they may be considered lower risk than, say, growth stocks.

•   They meet certain standards. You’ll often find blue chip stocks listed on the Dow Jones Industrial Average, S&P 500 Dividend Aristocrats, or the Bridgeway Blue Chip 35 Index. Some of these indexes can have stringent rules that only the most financially stable companies could meet.

•   They pay dividends. Blue chip stocks typically pay out dividends, or a share of the company’s profits, to shareholders.

Taken together, these qualities can make blue chips an important part of a defensive investment strategy.

Investors may want to consider them when they’re researching stocks to buy through an online brokerage or a traditional one.

10 of the Biggest Blue Chip Stocks

Here is a selection of 10 U.S. blue chip companies from Morningstar’s Best Companies to Own list. They are the largest by market cap, as of February 21, 2025.

These companies have been around for decades, and because of their consistent performance history, they’re considered blue chip stocks today. You may want to consider them when you’re thinking about portfolio diversification.

•   Anheuser-Busch InBev (BUD)

•   Pfizer (PFE)

•   Nike (NKE)

•   Taiwan Semiconductor Manufacturing (TSM)

•   Roche Holding (RHHBY)

•   Alphabet (GOOGL)

•   Danaher (DHR)

•   Caterpillar (CAT)

•   Merck (MRK)

•   Nestle (NSRGY)

Pros and Cons of Investing in Blue Chip Stocks

Like any investment, blue chip stocks have their potential benefits and drawbacks. Before investing in blue chip stocks, you may want to weigh the positives and negatives of these types of stocks on your overall investment strategy.

Benefits of Blue Chip Investments

Blue chip stocks can offer investors certain benefits:

•   They’re here for the long term. Many of these companies are global in reach, with immense resources and real staying power. Thus, blue chip stocks may be more stable than smaller companies in their sectors — but with the ability to innovate and maintain their status.

•   They can be lower risk. Blue chip stocks are often considered lower risk stocks because of their size and market history in the market. As noted above, many of them also pay dividends, which benefits investors.

•   They’re highly liquid. Because these companies trade frequently, but are typically not volatile, investors can generally be confident in these stocks’ value when selling.

•   They’re easy to follow. The companies behind many blue chip stocks tend to be well known, which means announcements and news around them is likely to make the front page of the financial section.

Potential Drawbacks of Blue Chip Stocks

There’s no such thing as a “sure thing,” especially in investing, and the drawbacks of blue chip stocks prove this point. Here are a few cons to keep in mind when considering blue chips for your portfolio.

•   They may fall harder. The old adage “the bigger they are, the harder they fall” may apply here. Just because a blue chip stock has a solid history does not ensure a profitable future, and legacy brands can fall behind nimble newcomers.

•   Limited growth. Though these companies typically have longevity on their side, they are often past their prime growth years. This is why blue chip companies also have a reputation for less volatile and lower risk.

•   They may be expensive. Blue chip stocks tend to be well-known brands and can be a desirable part of people’s investment strategies. For that reason, you’re unlikely to get a deal on them.

Investing in Individual Blue Chip Stocks

Like a well-balanced meal, investing in blue chip stocks can be one part of a healthy portfolio. Those looking to make blue chip stocks a part of their balanced investment strategy may first consider investing in individual stocks.

If the price per share is too steep for an investor’s budget, investors can consider fractional share investing, which allows the purchase of a fraction of a stock instead of the whole share, starting at just $5. Restrictions do apply for fractional shares.

Choosing to invest in an individual stock might be a good way to get a feel for the market, or it might be a way to take a more active investment strategy. Either way, a brokerage can handle an investor’s single blue chip stock purchase.

Blue Chip Funds: An Alternative to Individual Stocks

If no individual stock strikes your fancy, but you still want to get into the blue chip game, you might consider investing in index funds or ETFs that focus on blue chip stocks.

Various index funds and ETFs typically hold a diversified basket of stocks, often in line with a stock market index that tracks a segment of the market. Choosing an index fund or ETF that tracks large-cap stocks, the S&P 500, or the Dow Jones Industrial average can be one way to invest in a wide range of blue chip companies and add diversification.

The Takeaway

A company’s stock may earn a blue chip designation when they have a strong performance history, consistent returns, excellent financials, and over time they’ve become industry leaders.

For investors who are ready to start investing, blue chip stocks can be a solid choice, offering reliable performance — but not one that’s likely to deliver a lot of growth. As such, blue chips are often viewed as being conservative (i.e., lower risk). Being conservative can be an important part of an investment strategy, and investors may want to include other investments as well.

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).


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

FAQ

Where did the term “blue chip” come from?

The term “blue chips” may have come from poker, where blue chips are traditionally worth more than other chips.

What are some examples of well-known blue chip companies?

There are blue chip companies in every industry. Some well-known blue chips include companies like Wells Fargo, Anheuser Busch, Nike, Caterpillar, and Pfizer.

What are the potential downsides of blue chip investments?

While blue chips are considered steady and reliable, they aren’t immune to market volatility, and can be vulnerable to more nimble competitors. Blue chips also tend to be expensive, and more conservative than, say, growth stocks — something to bear in mind when constructing a balanced portfolio.

How do I invest in blue chip stocks?

Blue chip stocks are generally available to investors directly through a brokerage account, as well as through mutual funds and ETFs, which offer a basket of stocks. It’s also possible to purchase fractional shares of blue chip stocks.

There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event.

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.


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.
[cd_fractional]
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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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