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Q: What Is a Bull Put Spread?

A bull put spread is anoptions trading strategythat involves buying a put option and selling another put option on the same underlying asset with the same expiration date, but at different strike prices. The trade is considered a neutral-to-bullish strategy, since it’s designed so the maximum benefit occurs when an asset’s price moderately increases.

Mar

2025

What Are Bull Put Spreads & How Do They Work?

Bull Put Spread: How This Options Strategy Works

By Brian Nibley | Going to College, invest, Investing, Terminology | Comments Off

A bull put spread is an options trading strategy that investors might use when they have a moderately bullish view of an asset, meaning they think the price will increase slightly. The strategy provides the potential for profit from an increase in an underlying asset’s price while limiting losses if an asset’s price declines.

Bull put spreads and options trading are not for everyone, but learning the ins and outs of this commonly used vertical options spread could be useful to traders’ looking to pursue gains while capping downside risk.

Key Points

• Bull put spreads allow investors to profit from modest price increases in the underlying asset, aligning with a moderately bullish market outlook.

• In a bull put spread strategy, an investor sells a put option, and buys another put option on the same security, with the same expiration date, but with lower strike price.

• The maximum gain with this strategy is the difference between the premium received for selling the put with the higher strike price and the premium paid for buying the second put, minus any commissions or fees.

• This strategy limits risk by capping maximum loss, providing protection from significant downside risk.

• Time decay helps as the short put loses value faster than the long put, letting traders keep more of the initial credit if the asset’s price stays stable or rises.

• Bull put spreads can be adjusted to align with different risk tolerances and market views, making them a flexible tool within options trading.

What Is a Bull Put Spread?

A bull put spread is an options trading strategy that involves buying a put option and selling another put option on the same underlying asset with the same expiration date, but at different strike prices. The trade is considered a neutral-to-bullish strategy, since it’s designed so the maximum benefit occurs when an asset’s price moderately increases.

To execute a bull put spread, a trader will simultaneously sell a put option at a specific strike price (the short leg of the trade) and buy a put option with a lower strike price (the long leg of the trade).

The trader receives a premium for selling the option with a higher strike price but pays a premium for buying the put option with a lower strike price. The premium paid for the long leg put option will always be less than the short leg since the lower strike put is further out of the money. The difference between the premium received and the premium paid is the maximum potential profit in the trade.

The goal of the bull put spread strategy is to finish the trade with the premium earned by selling the put (sometimes referred to as writing a put option) and lose no more than the premium paid for the long put.

A bull put spread options trading strategy is sometimes called a short put spread or a credit put spread.

How a Bull Put Spread Works

Bull put spreads focus on put options, which are options contracts that give the buyer the right – but not always the obligation – to sell a security at a given price (the strike price) during a set period of time.

The bull put spread strategy earns the highest profit in situations where the underlying stock trades at or above the strike price of the short put option – the put option sold with the higher strike price – upon expiration. This strategy, therefore, works best for assets that the traders of a bull put spread believe will trade slightly upwards.

The strategy offers investors the potential to benefit from a stock’s rising price without having to hold shares. An options strategy like this also caps downside risk because the maximum loss is calculated as the difference between the strike prices of the two puts minus the net credit received.

Even though the risk is limited, there can still be times when it makes sense to close out the trade.

Max Profit and Risk

A bull put spread is meant to profit from a rising stock price, time decay, or both. This strategy caps both potential profit and loss, meaning its risk is limited.

The profit of a bull put spread is capped at the premium received by selling the short leg of the trade, minus the premium spent buying the long leg put option. This maximum profit is therefore seen if the underlying asset finishes at any price above the strike price of the short leg of the trade.

Maximum profit = premium received for selling put option – premium paid for buying put option

The maximum loss of a bull put spread is the difference between the strike prices of the short put and the long put, minus the net premium received. This occurs if the underlying asset’s price falls below the long put’s strike price at expiration.

Maximum loss = strike price of short put – strike price of long put – net premium received

The breakeven point of a bull put spread is the price the underlying asset trades at expiration so that the trader will come away even. The breakeven point is calculated as the strike price of the short put (the higher strike price) minus the net premium received upfront for the sale and purchase of both puts. At the breakeven, the trader neither makes nor loses money, not including commissions and fees.

Breakeven point = strike price of short put – net premium received

Bull Put Spread Example

A trader would like to use a bull put spread for XYZ stock since they think the price will slowly go up a month from now. XYZ is trading at $150 per share. The trader sells a put option for a premium of $3 with a strike price of $150. At the same time, they buy a put option with a premium of $1 and a strike price of $140 to limit their downside risk. Both put options have the same expiration date in a month.

The trader collects the difference between the two premiums, which is $2 ($3 – $1). Since each option contract is usually for 100 shares of stock, she’d collect a $200 premium when opening the bull put spread.

Maximum Profit

As long as XYZ stock trades at or above $150 at expiration, both puts will expire worthless, and the trader will keep the $200 premium received at the start of the trade, minus commissions and fees.

Maximum profit = $3 – $1 = $2 x 100 shares = $200

Maximum Loss

The trader will experience the maximum loss if XYZ stock trades below $140 at expiration, the lower strike price of the long leg of the trade. In this scenario, the trader will lose $800, plus commissions and fees.

Maximum loss = $150 – $140 – ($3 – $1) = $8 x 100 shares = $800

Breakeven

If XYZ stock trades at $148 at expiration, the trader will lose $200 from the short leg of the trade with the $150 stock price. However, this will be balanced out by the initial $200 premium they received when opening the position. The trader neither makes nor loses money in this scenario, not including commissions and fees.

Breakeven point = $150 – ($3 – $1) = $148

Bull Put Spread Exit Strategy

Often, trades don’t go as planned. If they did, trading would be easy, and everyone would succeed. It’s important for investors to consider how they might mitigate risk before they begin initiating a strategy, especially given the higher risk associated with options trading.

Having an exit strategy can help by providing a plan to cut losses at a predetermined point, rather than being caught off guard.

An exit strategy may be a little complicated for a bull put spread. Before the expiration date, you may want to exit the trade so you don’t have to buy an asset you may be obligated to purchase because you sold a put option. You may also decide to exit the position if the underlying asset price is falling and you want to limit your losses rather than take the maximum loss.

To close out a bull put spread entirely would require that the trader buy the short put contract to close and sell the long put option to close.

Recommended: Buy to Open vs Buy to Close

Pros and Cons of Bull Put Spreads

The following are some of the advantages and disadvantages of bull put spreads:

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Bull Put Spread Pros:

• Protection from downside risk; the maximum loss is known at the start of the trade

• The potential to profit from a modest decline in the price of the underlying asset price

• You can tailor the strategy based on your risk profile

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Bull Put Spread Cons:

• The gains from the strategy will be limited and may be lower than if the trader bought the underlying asset outright

• Maximum loss is usually more substantial than the maximum gain

• Difficult trading strategy for novice investors

Impacts of Variables

Several variables impact options prices, and options trading terminology describes how these variables might change in a given position.

Because a bull put spread consists of a short put and a long put, changes in certain variables can impact the position differently than other options positions. Here’s a brief summary.

1. Stock Price Change

A bull put spread does well when the underlying security price rises, making it a bullish strategy. When the price falls, the spread performs poorly. This is known as a position with a “net positive delta.” Delta is an options measurement that refers to how much the price of an option will change as the underlying security price changes. The ratio of a stock’s price change to an option’s price change is not usually one-to-one.

Because a bull put spread is made up of one long put and one short put, the delta often won’t change much as the stock price changes if the time to expiration remains constant. This is known as a “near-zero gamma” trade. Gamma in options trading is an estimation of how much the delta of a position will change as the underlying stock price changes.

2. Changes in Volatility

Volatility refers to how much the price of a stock might fluctuate in percentage terms across a specific timeline. Implied volatility (IV) is a variable in options prices. Higher volatility usually means higher options prices, assuming other factors stay the same. But a bull put spread changes very little when volatility changes, and everything else remains equal.

This is known as a “near-zero vega” position. Vega measures how much an option price will change when volatility changes, but other factors remain constant.

3. Time

Time decay refers to the fact that the value of an option declines as expiration draws near. The relationship of the stock price to the strike prices of the two put options will determine how time decay impacts the price of a bull put spread.

If the price of the underlying stock is near or above the strike price of the short put (the option with a higher strike price), then the price of the bull put spread narrows (allowing the trader to potentially profit) as time goes on. This occurs because the short put is closest to being in the money and falls victim to time decay more rapidly than the long put.

But if the stock price is near or below the long put’s strike price (the option with a lower strike price), then the value of the bull put spread widens (causing a loss) as time goes on. This occurs because the long put is closer to being in the money and will suffer the effects of time decay faster than the short put.

In cases where the underlying asset’s price is squarely in-between both strike prices, time decay barely affects the price of a bull put spread, as both the long and short puts will suffer time decay at more or less the same rate.

4. Early assignment

American-style options can be exercised at any time before expiration. Writers of a short options position can’t control when they might be required to fulfill the obligation of the contract. For this reason, the risk of early assignment (i.e., the risk of being required to buy the underlying asset per the option contract) must be considered when entering into short positions using options.

In a bull put spread, only the short put has early assignment risk because it represents the obligation to purchase the underlying asset. Early assignment of options usually has to do with dividends, and sometimes short puts can be assigned on the underlying stock’s ex-dividend date (the date someone has to start holding a stock if they want to receive the next dividend payment).

In-the-money puts with time value that doesn’t match the dividends of the underlying stock are likely to be assigned, as traders could earn more from the dividends they receive as a result of holding the shares than they would from the premium of the option.

For this reason, if the underlying stock price is below the short put’s strike price in a bull put spread, traders may want to contemplate the risk of early assignment. In cases where early assignment seems likely, using an exit strategy of some kind could be appropriate.

The Bottom Line

A bull put spread is one of four frequently used vertical options spreads that traders may use to try to benefit from the price movements of stocks or other assets. While the potential rewards of a bull put spread are limited, so too are its potential losses when the stock price moves in an unfavorable direction, which can make it a useful strategy for traders to have in their toolkit.

Trading options isn’t easy and can involve significant risk. Many variables are involved in options trading, some of which have been notorious for catching newbie traders by surprise. It’s important to consider your risk tolerance before initiating an options trade.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.

Explore SoFi’s user-friendly options trading platform.

🛈 While investors are not able to sell options on SoFi’s options trading platform at this time, they can buy call and put options to try to benefit from stock movements or manage risk.

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Mar

2025

Wire Transfer vs Direct Deposit

By Rebecca Lake | Financial Topics, Terminology | Comments Off

Wire transfers and direct deposit are both methods for moving money, but they have significant differences. Wire transfers are usually done on an individual basis and allow you to send money from your bank account to someone else’s account electronically, either domestically or internationally. Direct deposit, however, is typically used by businesses and organizations, often on a recurring basis, to transfer funds between bank accounts, though these transactions are typically limited to U.S. banks only. These two kinds of financial transactions are also processed differently and can involve dissimilar fees.
Read on to learn more about the differences between a wire transfer vs. direct deposit so you can use the technique that best suits your needs.

Key Points

• Wire transfers and direct deposits are both methods for moving money, with significant differences in usage and fees.

• Wire transfers are typically used for one-time payments, both domestically and internationally, and often involve fees.

• Direct deposits are commonly used for recurring payments, such as wages and government benefits, usually within the U.S., and are often fee-free for recipients.

• Wire transfers are fast and secure but can be costly and irreversible once sent.

• Direct deposits offer convenience and possibly early access to wages but require accurate account information and initial set-up time.

What Is a Wire Transfer?

A wire transfer is an electronic transaction that allows money to move from one bank account to another. You initiate the wire transfer through your bank if you’re the person who’s sending money. The bank executes the transfer on your behalf and typically charges you a fee for that service. Some points to be aware of:

• Wire transfers can be domestic, meaning you’re transferring money from one bank to another in the U.S., or international. For example, you might live and bank in the U.S. but need to send money to relatives living in Spain. A wire transfer would allow you to do that, without having to send cash or put a check in the mail.

• Banks and credit unions can offer wire transfer services. The timing can vary, with domestic transfers typically being completed within a business day, while international ones can take between one and five days.

• The fees you pay for a domestic or international wire transfer will depend on which financial institution completes the transfer for you. Some banks also charge a fee to receive a wire transfer into your account. Typically, outgoing wire transfers can cost anywhere from $0 to $50 depending on the transaction’s details.

• It’s also possible to wire money through nonbank providers, such as Western Union or MoneyGram, if you don’t have a bank account or you need to send cash to someone. Each company has its own fee schedule that determines how much you’ll pay to send or receive money.

How Do Wire Transfers Work?

Wire transfers work by allowing you to send money directly from your bank account to someone else’s. You can use a wire transfer to send money to an individual or to a business.

Each bank has its own wire transfer policies but generally, the process works like this:

• The sender provides their bank with the required information to initiate a wire transfer, making sure they have enough funds for the transaction.

• The bank verifies the information and calculates the wire transfer fee, if applicable.

• The sending bank initiates a transfer action with the recipient bank through a secure messaging network.

• The recipient bank acknowledges the message and deposits funds equal to the amount of the transfer into the recipient’s account.

Wire transfers can be sent through SWIFT (Society for Worldwide Interbank Financial Telecommunication), the Federal Reserve Wire Network, or the CHIP (Clearing House Interbank Payments) system.

In terms of processing times, domestic transfers are typically completed within one business day, while international wire transfers may take one to five business days. There may also be cutoff times at a given financial institution, which can impact how quickly the funds are transferred and made available.

What You Need to Send a Wire Transfer

Wiring money is a fairly straightforward process, and it starts with organizing the required information. Here’s what you’ll need to send a wire transfer at a bank.

• Domestic transfers. You’ll need the recipient’s name, address, their bank account number, and their bank’s routing number. Some banks may request the recipient’s phone number as well.

• International transfers. You’ll need the recipient’s name, address, and bank account number (IBAN), as well as their bank’s SWIFT code (this may be referred to as a BIC, or bank identification code).

You’ll also need to have sufficient funds in your bank account to cover the amount of the transfer, plus any wire transfer fee the bank charges. Depending on whether the transfer is domestic or international and the type of account you have, the wire transfer fees could range from $0 to $50, as noted above.

If you’re sending money via wire transfer through Western Union, MoneyGram, or another nonbank provider, you’ll typically need the following:

• Your government-issued photo ID and personal details

• Funds for the transaction and to cover any fees (you may be able to pay with cash, a credit card or debit card, or via your bank account, depending on the specific transfer and service involved)

• Recipient’s name, phone number, and address

• Recipient’s bank name, account number, and routing number

• SWIFT code for international transfers

One thing to note is that once a wire transfer is sent, it’s very difficult to get the money back or cancel the transaction. So it’s important to double-check all of the information beforehand to make sure you’re sending the right amount of money, to the right person, and the right bank account.

Advantages and Disadvantages of Wire Transfers

Wire transfers can be a good choice for sending money in certain situations. For example, if you need to deliver funds to someone within one business day, a domestic wire transfer could allow you to do that. There are, however, some downsides to consider.

Advantages	Disadvantages
Wire transfers are typically quick, with domestic transfers usually processing within one business day.	In most cases, you cannot reverse or change a wire transfer once it’s been sent.
Wire transfers can allow you to send large amounts of money without having to write checks.	Your bank may impose limits on the amount of money you can transfer in a single transaction.
A wire transfer can be a secure way to send money domestically or internationally.	Scammers may use ploys involving wire transfer requests to defraud consumers.
There is no risk of incurring overdraft or nonsufficient funds fees, as there is with payments by check.	Banks can charge fees for domestic and international wire transfers, up to $50 each.

In terms of what’s good about wire transfers, they’re a fast way to send money and they’re more reliable and secure than checks or cash. On the other hand, there are the fees to contend with and the inherent risk of sending the wrong amount or directing funds to the wrong bank account. Additionally, other money transfer services may be just as fast without charging steep fees.

What Is a Direct Deposit?

Direct deposit allows you to receive money into your bank account electronically, without needing to deposit a paper check or cash. Funds move from the sender’s account to your account on a scheduled date. To delve in a little more deeply:

• Direct deposit can be a convenient way to receive funds in the U.S. There’s no need to wait for a check and then deposit or cash it.

• Depending on where you bank and the kind of account you have, you may be able to get paid up to two days early with direct deposit payments.

• This method is often used for recurring payments, such as wages.

• You can set up direct deposit to receive your paychecks, tax refunds, or payments of government benefits if you receive them.

• Direct deposit can also be used to send payments for court-ordered child support. Parents who are required to pay support through a wage withholding plan may opt to have that money withdrawn from their paychecks automatically. Those funds can then be routed to the recipient parent’s bank account via direct deposit.

It’s worth noting that direct deposit is a very popular technique for getting paid. In fact, more than 95% of Americans are paid this way.

Also, there are some exceptions to the U.S.-only rule. For instance, if you are eligible to receive Social Security payments but live outside the U.S., you may be able to receive your benefits via direct deposit to an American financial institution or one overseas that has an international direct deposit agreement with the U.S.

How Does Direct Deposit Work?

Direct deposits are a form of ACH (or Automated Clearing House) payment. The ACH is a network that links banks in order to allow for the transfers of funds. An ACH transfer is one kind of electronic funds transfer, or EFT. In terms of the difference between ACH vs. EFT, the former refers to a specific category of payment methods, while the latter includes a broader range of electronic payments.

That’s important to understand when discussing how direct deposit works. Here’s what the process involves:

• On a scheduled day, the sender forwards a direct deposit request to the Automated Clearing House.

• The ACH processes the transaction and forwards the appropriate amount of funds to the recipient’s bank.

• The recipient bank verifies the details of the direct deposit and credits the recipient’s bank account with the money.

• The deposit amount is then deducted from the sender’s bank account.

There’s typically no fee to enroll in direct deposit as the recipient, though senders may pay a fee to the bank. That can include a set-up fee as well as a fee for each direct deposit transaction.

The average time for direct deposit to be completed and clear your bank account can vary based on where you bank. You may be able to get paid early (up to two days before “payday,” typically). However, the bank’s funds availability policy will determine when you can access the money in your account.

One additional note: Although direct deposit is typically initiated by businesses and government agencies using ACH transfers, individuals may be able to send a version of direct deposit via an app (either your bank’s or a third-party app) to transfer funds to, say, a friend or family member’s account.

What You Need to Send a Direct Deposit

If you would like to receive direct deposits of your paychecks, you’ll likely need to fill out a direct deposit form with some personal and banking details. These may include:

• Your name and Social Security number

• Bank account number and routing number where the money should be sent

• Account type (checking or savings)

• Possibly a voided check and/or deposit slip

• Details on whether you want the full paycheck sent to checking or perhaps some of it deposited into a savings account.

You’ll usually sign and date the form; then, your employer’s payroll department will typically handle the processing of these materials. Keep in mind that it may take one to two pay cycles for the direct deposit to take effect, as well as the fact that direct deposit is usually only for use within the U.S.

If you want to send money to someone via direct deposit as an employer, you’ll have to coordinate with your payroll processor to initiate a program. You’ll need to provide your employees with a direct deposit form and get their personal and bank account information, as noted above, in order to start direct deposit payments.

Advantages and Disadvantages of Direct Deposit

Just like wire transfers, direct deposit can have some pros and cons. It’s important to consider both if you have the option to enroll in direct deposit to receive your paychecks, tax refunds, government benefits, child support, or other payments.

Advantages	Disadvantages
No need to visit a bank branch to deposit payments to your bank account.	Tech snafus could result in delays in receiving direct deposit payments.
Potentially get paid up to two days early when you enroll in direct deposit of your paychecks.	Initial set-up can take time to process, and you may still need to get paid via paper check in the meantime.
Direct deposit is typically free for employees.	Changing banks means updating direct deposit information, which can slow down payments temporarily.
You can split direct deposit payments into multiple accounts to make paying bills or saving easier.
Direct deposit payments of certain government benefits may be protected from being seized by creditors.

Direct deposit can be a convenient and cost-effective way to get paid. As with wire transfers, it’s important to make sure your account information is accurate and up-to-date. Sending a direct deposit to a closed account or to the wrong bank account could create financial headaches that may take time and effort to untangle.

Why You Might Use a Wire Transfer Over a Direct Deposit

There are some situations where it might make sense to choose a wire transfer in place of a direct deposit payment. For example, you might choose a wire transfer if you:

• Need to make a one-time payment to another person or business

• Want to send a large amount of money securely, without having to write a check or purchase an official check from the bank

• Are making a time-sensitive payment and don’t mind paying a fee to be able to do so

• Want to send money to another person or business internationally

• Have sufficient funds in your account to cover the payment and fees

The most important thing to consider may be the fees you’ll pay. Again, the cost of sending or receiving a wire transfer can vary by bank. Also, you might find yourself in a situation in which the recipient of the wire transfer has to pay a fee to receive it and wants you to cover that cost. Being aware of fees upfront can help you decide if a wire transfer is the best option.

Why You Might Use a Direct Deposit Over a Wire Transfer

Direct deposits can be useful in a number of situations. You might choose to enroll in direct deposit if you:

• Want to get paid without having to deposit a paper check and waiting for it to clear

• Prefer to access your pay up to two days early, thanks to your bank’s policies

• Receive government benefits that you may be able to protect from creditor actions

• Would like to be able to split your paychecks, government benefits, or tax refunds across multiple checking and savings accounts

• Receive child support payments and would like them to be delivered to you without having to interact with the other parent

• Prefer to avoid the fees associated with wire transfers

Whether you choose a direct deposit vs. wire transfer can ultimately depend on the situation. If you need to send money, you can do that with a wire transfer. If you want to receive money, you could do so using wire transfers or (in the case of paychecks and certain other payments) direct deposit. Direct deposit is often a convenient way to receive recurring payments from a business or government agency.

The Takeaway

Wire transfers and direct deposit are both convenient ways to move funds. Typically, a wire transfer is a one-off way to quickly and securely send funds, domestically and internationally, though fees are often involved. Direct deposit, on the other hand, is usually used by businesses and government agencies to send money (such as paychecks or tax refunds) within the U.S., with the recipient not having to pay any fees.

SoFi currently offers incoming and limited outgoing domestic wire transfers, and our Checking and Savings accounts can offer a great place to receive direct deposits. Qualifying deposits may even be available up to two days early.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

Can you send direct deposits with a mobile app?

It’s possible to send direct payments to friends and family via a mobile app. Person-to-person payment apps allow you to forward funds from your bank account to someone else’s; your bank’s app may also have this capability. Depending on the particular transaction, there may be little or no fees involved.

Can you send direct deposits internationally?

It is possible to send direct deposit payments internationally in some situations. For instance, if you live abroad and receive Social Security benefits, you might receive them at a bank which has an international direct deposit agreement with the U.S.

Can you send wire transfers with a mobile app?

You can send wire transfers with your bank’s mobile app if the app is equipped with this feature. You’d need to provide the same information as you would if you were completing a wire transfer in person and make sure that the account you’re sending the money from has sufficient funds to cover the transfer and the fee.

Is there a fee with sending direct deposits?

If you’re sending direct deposit as an employer to one or more employees, your bank may charge a fee for that. If you’re receiving direct deposit of paychecks, tax refunds, or government benefits, there’s usually no fee for that. If you’re sending a direct payment to someone else, the app you’re using might charge a fee.

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SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

About the author

Rebecca Lake

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

photocredits: iStock/sayu_k
SOBK1222010

Mar

2025

What Is FICO Score vs. Credit Karma Score?

By Dan Miller | Financial Topics, Terminology | Comments Off

Understanding the differences between a FICO® Score and a Credit Karma Score is essential for managing your credit health. Both scores provide insight into your creditworthiness, but they are calculated using different models and data sources.

The FICO Score, developed by the Fair Isaac Corporation, is the most widely used credit scoring model by lenders, while Credit Karma relies on the VantageScore® model, which is based on data from TransUnion® and Equifax®. Knowing how each score is calculated and used can help you make informed financial decisions, whether you’re applying for a loan or simply monitoring your credit health.

Keep reading to learn more on FICO Score vs Credit Karma score, including how each model works, the differences between FICO Score and Credit Karma score, how credit scores are calculated, and more.

Key Points

• A FICO Score is a credit score that assesses a consumer’s creditworthiness based on factors like payment history, credit utilization, length of credit history, new credit, and credit mix.

• A Credit Karma score is a credit score provided by Credit Karma, typically based on the VantageScore model, which evaluates a consumer’s creditworthiness using data from TransUnion and Equifax.

• Lenders primarily use FICO Scores for loan approvals, while Credit Karma’s VantageScore is more for credit monitoring and personal finance management.

• Both FICO and VantageScore range from 300 to 850, but their scoring criteria and weighting for factors like payment history and credit utilization differ.

• Credit Karma updates scores more frequently, providing users with instant insights, while FICO Scores are typically updated when lenders request them during loan applications.

What Is a Credit Report?

A credit report is a statement that has information about your current and past history of paying loans and other types of credit. People have more than one credit report, as there are several different companies that collect and maintain credit information about consumers.

Three of the largest credit reporting agencies are Equifax, Experian®, and TransUnion, and many consumers have credit reports from all three of these credit reporting agencies. Typically, credit scores are calculated using the information on these credit reports, and you can build credit by improving the information on your credit report.

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*

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How Credit Karma Score Works

Credit Karma uses the VantageScore model, which evaluates factors like payment history, credit utilization, length of credit history, types of credit accounts, and recent inquiries to generate a credit score. Unlike the FICO Score, which is used by 90% of lenders, the VantageScore is primarily for educational purposes, helping consumers track their credit health and understand financial habits.

By providing free access to credit scores and reports, Credit Karma allows users to monitor changes, detect potential identity theft, and receive personalized recommendations for credit products. The platform updates scores regularly and offers insights on how different financial actions, such as paying off debt or opening new accounts, can impact credit standing.

How FICO Works

The FICO Score is a widely used credit scoring model that evaluates a consumer’s creditworthiness based on five key factors:

• Payment history (35%)

• Amounts owed (30%)

• Length of credit history (15%)

• New credit inquiries (10%)

• Credit mix (10%)

FICO Scores are considered highly reliable because they focus on a borrower’s financial behavior over time. Higher scores indicate responsible credit management and lower credit risk, which can help secure better loan terms and interest rates.

Differences Between Credit Karma Score vs. FICO Score

The FICO Score and Credit Karma score differ primarily in the scoring model and data sources they use:

1. Scoring Model: FICO Scores are calculated using proprietary algorithms developed by the Fair Isaac Corporation. Credit Karma, on the other hand, provides scores based on the VantageScore model, which was created by the three major credit bureaus (Equifax, Experian, and TransUnion).

2. Credit Bureau Data: FICO Scores can be derived from any of the three credit bureaus’ data, depending on what the lender requests. Credit Karma primarily pulls data from Equifax and TransUnion, which may lead to differences in reported scores.

3. Usage by Lenders: FICO Scores are the standard used by most lenders when making credit decisions, while VantageScore, which Credit Karma uses, is more common for educational and consumer monitoring purposes.

4. Score Range: Both models have credit score ranges from 300 to 850, but their algorithms weigh factors like payment history, credit utilization, and new credit inquiries differently, leading to potential score discrepancies.

5. Frequency of Updates: Credit Karma updates scores more frequently, often providing users with weekly updates, while FICO Scores are updated when requested by a lender or when information on your credit report changes.

How Credit Scores Are Calculated

Each company that creates a credit score has their own proprietary formula for what factors affect your credit score. This is the reason that credit scores from different companies vary. However, most companies use similar types of information. We already discussed what makes up the FICO Score; here is how VantageScore compares:

• Payment history (40%)

• Depth of credit (21%)

• Credit utilization (20%)

• Balances (11%)

• Recent credit (5%)

• Available credit (3%)

As you can see, payment history is weighted more heavily with VantageScore than FICO, and new or recent credit is weighted less. All of these factors will cause your credit score to differ by a few points between companies.

How to Check Your Credit Score and Credit Report

To check your credit score and credit report, you can visit websites like AnnualCreditReport.com, which provides free access to reports from the three major credit bureaus once a year. Additionally, many credit card companies and financial apps offer free access to your credit score and updates.

How to Access Your FICO Score and Credit Karma Score

If you want to know your FICO score, here are five ways to check it:

• Check with your bank or credit card issuer: Many financial institutions offer free FICO Score access to customers.

• Visit the official FICO website: Purchase your score directly from myFICO.com.

• Use credit monitoring services: Paid credit monitoring services like Experian CreditWorks offer regular access to your FICO Score, along with credit report updates and alerts for suspicious activity.

• Check with credit counseling agencies: Some nonprofit agencies offer free credit score reviews.
Request a credit report: While not always included, some reports might show your FICO Score.

Here’s how you can specifically access your Credit Karma score:

• Visit the website or download the app: Go to the official Credit Karma website or download the mobile app from the App Store or Google Play.

• Create an account: Provide personal information such as your name, address, Social Security number, and email to set up an account.

• Verify your identity: Answer security questions related to your credit history to confirm your identity.

• Access your credit score: Once verified, you can view your credit score and credit report for free, updated regularly.

• Monitor your credit health: Use Credit Karma’s tools to track changes, receive alerts for unusual activity, and get personalized tips to build your credit score.

Recommended: Free Credit Score Monitoring with SoFi

The Takeaway

Understanding the differences between FICO Score and Credit Karma score is helpful for managing your credit effectively. While both provide insights into your credit health, FICO Scores are widely used by lenders, whereas Credit Karma offers free access to VantageScores. Monitoring both is never a bad idea, as they can help you stay informed and improve your financial standing.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Is Credit Karma or FICO Score more accurate?

FICO Scores are considered more accurate for lending decisions because they are the standard used by most lenders. Credit Karma provides VantageScores, which can differ from FICO Scores due to different scoring models and criteria. While helpful for monitoring credit, Credit Karma scores may not reflect what lenders see.

Is my FICO Score the same as my credit score?

Your FICO Score is just one credit score, but it is one of the most popular credit scores used by lenders. When many people refer to their credit score, they are often referring to their FICO score.

Which credit score is most accurate?

There isn’t a consensus on which credit score is the most accurate — each company that produces a credit score believes their own proprietary formula is the best. What’s most important is likely to be the credit score model that is used by the lender that you are using (FICO is the most popular one), since that is the one that will affect your lending decision. The good news is that typically the different credit scores will be within a few points of each other.

What is a good FICO Score to buy a house?

A good FICO Score to buy a house typically falls within the range of 620 to 740, depending on the loan type. Conventional loans often require a minimum of 620, while FHA loans may accept lower scores. Higher scores can secure better interest rates and loan terms.

How do I build my FICO Score?

You can work on building your FICO score in a number of different ways, including regularly paying your bills, loans, and other debt obligations each and every month. Another way to build your FICO and other credit scores is by lowering your credit utilization.

How do I clean up my FICO Score?

One of the first things you can do to clean up your FICO score is to regularly review your credit reports. You can get a free copy of your credit reports each year from each of the major credit bureaus. Make sure that there is no incorrect or out-of-date information on your credit report. If there is, make sure to dispute it with the credit bureau. You can then work to pay off your debts, lower your utilization, and make on-time payments. Over time, this will likely clean up and build your FICO score.

photo credit: iStock/Thx4Stock
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SORL-Q125-024

Mar

2025

Understanding Palladium Investment

By Rebecca Lake | Growing Wealth, invest, Investing, Terminology, Tools & Calculators | Comments Off

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?

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

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.

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

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

Photo credit: iStock/Delmaine Donson

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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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SOIN-Q424-050

Mar

2025

Learn 7 Strategies to Double Your Money

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

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).

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.

Photo credit: iStock/South_agency

About the author

Rebecca Lake

SoFi Invest®

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Investing Strategies to Double Your Money

1. Get to Know the Rule of 72

2. Leverage Your Employer’s Retirement Plan

3. Diversify Strategically

4. Consider Buying When Others Are Selling

5. Commit for the Long Term

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