invest Archives | Page 20 of 182

Jul

2024

What Are Brokerage Checking Accounts?

By Ashley Kilroy | Growing Wealth, invest, Investing | Comments Off

Brokerage checking accounts combine the everyday usability of a checking account with the investment potential of a brokerage account, allowing you to manage both your bills and investments from a single platform. Often referred to as a “cash account” or “cash management account,” these accounts offer flexibility — you can buy, sell, or trade securities whenever you wish without facing penalties.

Understanding what a brokerage checking account is and how it works can help you determine if this type of account makes sense for your banking needs.

Key Features of Brokerage Checking Accounts

Investing can become quicker when you have an investment checking account, especially for active traders or those combining their checking and investment accounts. It gives you direct access to the stock market without the delays of traditional transfers between accounts.

Similar to other brokerage investment accounts, these accounts are not tax-advantaged. Here are some other noteworthy features.

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

Linked to Brokerage Investment Accounts

Brokerage checking accounts let you invest directly from your account, so there’s no waiting for transfers to start investing. Instead of opening one with a bank or credit union, you’ll need to go through a brokerage firm to get a brokerage checking account. Brokerages typically charge fees for opening and maintaining them.

Debit/ATM Card Access to Funds

Brokerage checking accounts generally offer checks, a debit card, and ATM access, similar to other types of checking accounts. Depending on the brokerage you choose, you might also get perks like ATM fee refunds or earn interest on your account balance.

Some brokerages may even waive foreign transaction fees when you travel abroad.

Benefits of a Brokerage Checking Account

Brokerage accounts with checking offer features like traditional bank checking accounts, but they often come with additional benefits not typically found in standard checking accounts.

Easily Move Money Between Investments

For active investors who trade regularly, investment checking accounts may simplify the trading process. Depending on your brokerage’s rules, you may be able to buy securities straight from it. This can make investing quicker and more convenient, streamlining the whole process.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Potential for Higher Interest Earnings

Depending on the brokerage you choose, some accounts stand out by offering high annual percentage yields (APYs), allowing you to earn more interest on your money compared to regular checking accounts. This can make them a good choice for growing your savings while still having easy access to your funds.

Integrated Money Management

Instead of juggling separate accounts for savings, spending, and investing, investment checking accounts let you manage all your money under one umbrella. This means you can handle everything from one place, making it potentially easier to keep track of your finances.

Potential Drawbacks

While brokerage accounts with checking have many advantages, there are a few drawbacks to consider.

May Require Minimum Balances

While some brokerages let you open accounts with no upfront cost, others require an initial deposit. Additionally, you may need to keep a specific balance in your account to avoid incurring maintenance fees.

Fees for Certain Transactions

While brokerage checking accounts typically have low relative fees, you might still encounter some costs for opening and maintaining your account. Additionally, certain brokerages may require you to connect a separate investment account, which could come with additional fees. It’s a good idea to check the specific terms and conditions of each brokerage to understand all potential costs.

No In-Person Service

If you choose an online brokerage firm, remember that you may not have access to in-person services. These firms operate entirely online, so you won’t be able to visit a physical branch for face-to-face assistance. Instead, all your interactions will be digital, through their website, app, or customer service hotline.

Eligibility and Account Opening

Before selecting a brokerage account with checking, make sure to compare your options by looking at fees, interest rates, and accessibility. Then once you’ve picked a brokerage firm, you can usually get started by opening your account online. If you opt for an online brokerage firm, that’ll be your main route.

You’ll need to have your personal details ready and transfer money from another account to fund your investment checking account. Most of the time, there’s no need to meet a minimum balance requirement just to get things up and running.

Comparing To Traditional Checking

Choosing asuitable checking account depends on what you need and what you’re looking for in your banking experience. Whether it’s easy access, fees, or extra features, understanding the differences between traditional and brokerage checking accounts can help you make a smart choice. Let’s break down the main factors to compare.

• Opening and maintenance fees: Traditional checking accounts usually have minimal opening fees and low maintenance costs, especially if you use your account abroad or maintain a minimum balance. Brokerage checking accounts also tend to have low fees, but some may require a significant initial deposit or a linked investment account, which could involve additional fees.

• Access: Traditional checking accounts offer convenient in-person access through branches and ATMs. On the other hand, brokerage accounts with checking linked to online brokerages may not have in-person services, although they typically provide ATM access.

• Features: Both account types generally include essentials like check-writing, debit card access, and online bill pay. Brokerage checking accounts often go further by offering investment options such as direct investing from the account and sometimes perks like ATM fee reimbursements.

• FDIC Insurance: Money in traditional checking accounts are FDIC-insured up to $250,000, ensuring your money is protected. Similarly, some brokerage checking accounts may hold your uninvested funds in FDIC-insured banks, providing comparable security. But you may need to opt-in, and generally, this may not be standard practice.

The Takeaway

Brokerage checking accounts may give you the best of both worlds:allowing you to handle your everyday banking needs while also offering investment opportunities. In effect, you can manage your bills and investments all in one place, with direct access to the stock market. However, before you decide if a brokerage checking account fits your needs, be sure to compare fees, interest rates, and how accessible it is for your financial goals.

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FAQ

What banks offer brokerage checking?

Online and traditional brokerages may offer brokerage checking accounts, but keep in mind they can differ significantly. So, take your time to shop around and find one that really suits your needs, with the features you want and fewer fees.

Can I have multiple brokerage checking accounts?

Similar to how you can have multiple investment accounts, you can have multiple brokerage checking accounts.

Are brokerage checking accounts FDIC-insured?

Brokerage accounts are backed by the Securities Investor Protection Corporation (SIPC) if your brokerage firm shuts down. For uninvested money, brokerage checking accounts usually keep it in FDIC-insured banks, just like regular banks do. Some firms might also offer extra FDIC coverage by using multiple banks.

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SoFi Invest®

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

SOIN-Q224-1900623-V1

Jul

2024

What Is a Gold IRA? How Do You Invest in One?

By Dan Miller | Growing Wealth, invest, Investing | Comments Off

While it’s common for people to use their IRA to invest in stocks, bonds, and other securities, it’s also possible to set up a self-directed IRA to invest in physical gold bars, coins, or bullion.

Although the assets within a self-directed IRA are considered alternative investments, these accounts still follow the standard IRS rules regarding tax advantages, annual contribution limits, and so forth.

That said, not all brokers offer self-directed IRAs. And investing in gold within an IRA may be more expensive owing to the cost of storing a physical commodity like gold.

Establishing a Gold IRA Account

It’s important to understand that there isn’t a dedicated “gold IRA” that’s geared toward investing in gold alone (or any other type of precious metal). Rather, investors interested in investing in gold or other types of alternative investments can set up what’s known as a self-directed IRA (or SIDRA) in order to choose investments that aren’t normally available through a traditional IRA account.

While alternative investments can be illiquid, volatile, or subject to other risk factors, investors interested in alts may be curious about the potential for greater diversification since these assets typically don’t move in tandem with conventional markets. In the case of precious metals, they can be an inflation hedge.

Understanding Self-Directed IRAs

Typically, most IRA providers only allow you to invest in securities like stocks, bonds, ETFs or mutual funds. If you want to invest in gold by buying shares in an ETF focusing on gold, or by purchasing stock in a gold mining company, then a traditional IRA custodian is fine.

But if you want to hold physical gold in your IRA, you’ll need to find a broker that will allow you to set up a self-directed IRA.

Self-directed IRAs and self-directed Roth IRAs allow account holders to buy and sell a wider variety of investments than regular traditional IRAs and Roth IRAs.

While a custodian or a trustee administers the SDIRA, the account holder typically manages the portfolio of assets themselves. These accounts may also come with higher fees than regular IRAs owing to the higher cost of storing physical assets like gold.

That said, a self-directed IRA follows the same general rules as ordinary IRAs in terms of tax rules, withdrawal restrictions, income caps, and annual contribution limits (see details below). A self-directed IRA can be set up as a traditional, tax-deferred account, or a self-directed Roth IRA.

Setting Up a Gold IRA Account

Once you’ve found an IRA custodian or brokerage that allows you to open a self-directed IRA and purchase physical gold, you can fund your account. Be sure you’re working with a reputable, experienced precious metals IRA custodian, and that the company is registered with the SEC (Securities and Exchange Commission) and with FINRA (Financial Industry Regulatory Authority).

The two most common ways to fund a gold IRA are by contributing cash or transferring money from an existing IRA or 401(k) account.

After you’ve funded your account, your broker will purchase the physical gold and store it for you. These same steps will hold true if you want to invest in other precious metals, including silver or platinum.

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Gold Standards for IRAs

Just as with a silver IRA, there are restrictions on the physical gold you are allowed to hold in an IRA. Any gold that is held in an IRA must be at least 99.5% pure.

Some common types of gold coins that are allowed to be held in a gold IRA include American Eagle bullion or coins, Canadian Maple Leaf coins and Australian Koala bullion coins.

Managing a Gold IRA Portfolio

The process for managing an IRA invested in gold is similar to managing an IRA that holds any commodity or security.

When you open a gold IRA, you will issue instructions to your broker to buy and sell physical gold, just as you would if you were buying stocks in a more traditional IRA. The value of your gold IRA portfolio fluctuates with the value of the physical gold that you hold.

You are not allowed to hold the gold yourself while it is part of your IRA. If you want to take possession of the physical gold bullion in your gold IRA, you will need to make a withdrawal from your IRA — which is subject to standard IRS rules governing IRA withdrawals.

An early withdrawal before age 59 ½ may result in taxes and/or penalties, so make sure you understand the terms before you take a withdrawal from a self-directed IRA.

Tax Advantages and Drawbacks of Gold IRAs

Remember that an IRA invested in gold still follows the basic structure and tax rules of traditional and Roth IRAs. The annual contribution limit for a regular, Roth, or self-directed IRA is $7,000 for tax year 2024, or $8,000 for those 50 and older.

• With a self-directed traditional IRA, you save money that’s considered pre-tax (just as in a traditional IRA account). The value of the assets within the account may grow over time, but taxes are deferred. This means you will owe tax on the money when you withdraw it, which you can do without penalty starting at age 59 ½.

• With a self-directed Roth IRA you make after-tax contributions, just as you would with a regular Roth IRA. Here the money grows tax free over time. In the case of a Roth account, qualified withdrawals are tax free starting at age 59 ½, as long as you have had the account for at least five years, according to the five-year rule.

In addition, investors who want to set up a Roth SIDRA must meet certain income requirements (the same income caps as for a regular Roth IRA). For single and joint tax filers: in order to contribute the full amount to a Roth IRA you must earn less than $146,000 (for single filers) or $230,000 (if you’re married, filing jointly), respectively. See IRS.gov for additional details, or consider consulting a tax professional.

One of the biggest drawbacks of a gold IRA is that the money in your IRA is generally intended for retirement. That means that if you withdraw the money in any IRA before you reach 59 ½, you may have to pay additional taxes and/or a 10% penalty. Another drawback is that you are limited by how much you can contribute to a gold IRA each year.

The Takeaway

There isn’t a specific type of IRA called a gold IRA — this is just a common way to refer to a self-directed IRA that is used to invest in physical gold. A gold IRA might be a traditional or a Roth IRA, which each come with certain tax advantages. Any gold that you hold in a self-directed IRA must be at least 99.5% pure. Additionally, not all brokers allow you to self-direct your investments and hold gold in your IRA.

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FAQ

What types of gold investments can be held in a gold IRA?

Like other commodities including silver or platinum, there are specific rules about what kinds of gold investments can be held in a gold IRA. Gold must be at least 99.5% pure to be eligible to be held in an IRA. This includes coins like the Australian Koala, Canadian Maple Leaf, or American Eagle.

How do you set up and fund a gold IRA account?

The most important step to setting up and funding a gold IRA is to find a custodian that will allow you to open a self-directed IRA and invest in precious metals. Once you have found a custodian that will, simply follow their account setup instructions. Then you can fund your gold IRA, by either making a new contribution, or transferring money from a 401(k) account or an existing IRA.

What are the tax benefits and restrictions associated with a gold IRA?

The tax benefits and restrictions of a self-directed gold IRA are the same as any other IRA. With a traditional gold IRA, you may be eligible for a tax deduction in the year that you make a contribution, but you’ll owe taxes on withdrawals. With a Roth gold IRA, you don’t get a tax deduction when you make your contribution — instead, your withdrawals are tax free. In most circumstances, you will have to pay taxes and/or penalties if you make a withdrawal before age 59 ½.

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SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
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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.

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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.

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

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.
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SOIN-Q224-1900719-V1

Jul

2024

What Is a Silver IRA? How Do They Work?

By Dan Miller | Growing Wealth, invest, Investing | Comments Off

A silver IRA follows the basic rules of an ordinary IRA account, but it has a special designation as a self-directed IRA that allows you to invest in precious metals like silver.

It’s important to note that you don’t need to open a specific silver IRA. Instead, you set up a self-directed account with a qualified broker that specializes in precious metals or other types of alternative investments (e.g. real estate, commodities, private placements, and others).

That said, not all brokers offer self-directed IRAs. And investing in silver within an IRA may be more expensive owing to the cost of storing a physical commodity like silver.

Introduction to IRAs Invested in Precious Metals

An IRA invested in silver assets is one way to invest in precious metals. There are a few kinds of precious metal IRAs you can invest in, including a platinum IRA, a gold IRA, or a palladium IRA.

How a Self-Directed IRA Works

Again, it is important to note that these are not separate types of IRAs. Rather, investors interested in investing in silver or other types of alternative investments can set up what’s known as a self-directed IRA (or SIDRA) in order to choose investments that aren’t normally available through a traditional IRA account.

While the brokerage administers the SDIRA, the investor typically manages the portfolio of assets themselves. These accounts may also come with higher fees than regular IRAs owing to the higher cost of storing physical assets like silver.

That said, these accounts follow the same rules as ordinary IRAs in terms of withdrawal restrictions, income caps, taxes, and annual contribution limits (see details below). A self-directed IRA can be set up as a traditional, tax-deferred account, or a self-directed Roth IRA.

¹Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

Establishing a Silver IRA

If you’re ready to start investing in precious metals and you’ve found a broker or IRA custodian that will allow you to open a SDIRA and purchase silver in your account, you must fund it, either by depositing cash or by transferring money from an existing 401(k) or IRA account. Then your custodian will purchase the physical silver bullion and store it for you.

Requirements for Silver Investments

When comparing a commodity vs. a security, the IRS has specific rules for investing in commodities like silver in an IRA.

One of the most important is that any physical silver bullion held in your IRA must be at least 99.9% pure. This includes coins such as the Australian Silver Kangaroo, American Silver Eagle or Canadian Maple Leaf. Make sure that you work with a reputable precious metals IRA custodian that can ensure you are only investing in approved investments.

Be sure to check that the company is registered both with FINRA (Financial Industry Regulatory Authority) as well as the SEC (Securities and Exchange Commission).

Managing a Silver IRA Portfolio

The guidelines for managing a silver IRA portfolio are similar to the rules for any other type of IRA.

When you open a silver IRA, you will issue instructions to your broker to buy and sell physical silver, just as you would if you were buying stocks in a regular IRA. The value of your silver IRA portfolio will vary according to the price of silver in the market.

You don’t hold onto or store the silver yourself while it’s an asset in your IRA. If you want to take possession of the physical assets in your silver IRA, you would need to make a withdrawal from your IRA — which is subject to standard rules governing IRA withdrawals.

An early withdrawal before age 59 ½ may result in taxes and/or penalties, so make sure you understand the terms of investing in any IRA before you take a withdrawal from a self-directed IRA.

Tax Advantages and Drawbacks of Silver IRAs

Remember that a silver IRA still follows the basic structure and tax rules of traditional and Roth IRAs. The annual contribution limit for a regular, Roth, or self-directed IRA is $7,000 for tax year 2024, or $8,000 for those 50 and older.

• With a self-directed traditional IRA, you save pre-tax money for your retirement, similar to a traditional IRA. The assets grow tax deferred over time. You pay taxes on the money when you withdraw it, which you can do without a penalty starting at age 59 ½.

• With a self-directed Roth IRA, similar to a regular Roth IRA, you make after-tax contributions. Your assets also grow tax free over time. And in the case of a Roth account, qualified withdrawals are tax free starting at age 59 ½, as long as you have had the account for at least five years, according to the five-year rule.

In addition, investors who want to set up a Roth SIDRA must meet certain income requirements. These are the same as the income caps on an ordinary Roth account. In order to contribute the full amount to a Roth IRA you must earn less than $146,000 (for single filers) or $230,000 (if you’re married, filing jointly), respectively. See IRS.gov for more information, or consult a tax professional.

One of the drawbacks of a silver IRA is that the assets in your IRA are intended for retirement. That means that if you withdraw the money in any IRA before you reach 59 ½, you may have to pay additional taxes and/or a 10% penalty.

The Takeaway

A silver IRA is a common name for a self-directed IRA that invests in and holds physical silver bullion. You can open either a traditional silver IRA or a Roth silver IRA, each of which comes with its own tax advantages.

Only certain brokerages support investing in silver in a self-directed IRA, so make sure that you have found a reputable company that offers this option. It’s also important to know that the IRS has certain regulations about investing in a silver IRA, such as a requirement that any silver be at last 99.9% pure.

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

FAQ

What types of silver investments are eligible for a silver IRA?

If you are looking to invest in gold, silver or other precious metals, it’s important to understand that there are certain IRS requirements and regulations for the types of silver you can hold in an IRA. Only silver that is 99.9% pure is allowed to be held in a Silver IRA. This includes popular coins such as the Canadian Maple Leaf, Australian Silver Kangaroo, or American Silver Eagle.

How does the process of establishing and funding a silver IRA work?

The first step in opening up a silver IRA is to find an IRA custodian that allows you to self-direct (or manage) your investments. Once you’ve opened a self-directed IRA at a brokerage that supports it, you can deposit money or transfer it from an existing 401(k) account or IRA. Your custodian will then purchase the silver bullion based on your instructions.

What are the potential tax advantages and drawbacks of a silver IRA?

The tax advantages of a silver IRA depend on whether it is structured as a traditional or Roth self-directed IRA. With a traditional IRA, you may be eligible for a tax deduction in the year that you make your contributions. With a Roth IRA, you pay tax on your contributions in the year you make them, but you don’t pay capital gains on withdrawals; qualified withdrawals are tax free.

One potential drawback is that, in most circumstances, you will have to pay additional taxes and/or penalties if you withdraw money from your IRA before you reach retirement age.

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SoFi Invest®

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

Jul

2024

How to Invest in Wine

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

Wine investing may appeal to investors seeking exposure to alternative asset classes. Owning wine as an investment can add diversification to a portfolio, which can act as an inflationary hedge and a buffer against market volatility.

And while investing in a tangible asset has its own risks, wine can potentially offer returns over time. Online platforms have made it easier to invest in wine, though some investors may prefer to build a physical collection of their own. There are pros and cons to both approaches to investing in wine.

The Rise of Wine as an Alternative Investment

Wine holds some attraction for investors, and it’s gained popularity as an alternative investment in recent years. Fine wine assets recorded an average growth of 146% during the 10 years ending in the fourth quarter of 2023.

Technology has also reshaped the wine investing landscape. Investors are no longer limited to setting up their own wine cellar; online platforms offer access to diversified portfolios of fine wines and premium whiskies. The barrier to entry can be lower in some cases, making wine a more accessible investment overall.

In addition, investing in wine is an opportunity to explore your passions. If you consider yourself a wine connoisseur, holding wine as an investment could be a natural fit. As with any type of investment, it helps to be engaged in the assets you own.

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Is Wine a Good Investment Option?

Wine offers some unique advantages for investors who are interested in adding something different to their portfolio. Historically, investment-grade wine returns an average compound annual growth rate of 10%. As a point of comparison, since its inception the S&P 500 has also delivered historical returns of about 10% annually.

To better track the wine market, investors may want to become familiar with benchmarks like the London International Vintners Exchange (aka, the Liv-ex). Similar to how the S&P 500 index is the benchmark for U.S. equities, the Liv-ex tracks the international wine market.

While it’s possible to debate whether wine should be considered a commodity vs. a security, there’s no question that many investors turn to wine as an investment. Following are some of the reasons investors find it to be an attractive option:

• Investing in wine allows for diversification with little to no correlation to stocks, bonds, and other traditional asset classes.

• Like real estate and other alternatives, wine is generally less susceptible to disruptions in the market that may result in increased volatility.

• Wine investments may hold steady during periods of rising inflation or market downturns, including recessionary periods.

• Fine wines can be an effective risk management tool when held alongside more traditional assets.

Risks and Considerations of Wine Investing

Before exploring wine investments, it’s helpful to consider the potential risks. For example:

• Wine may require a sizable initial investment if you’re purchasing individual bottles or buying into a private placement wine fund.

• Similar to the risks of investing in art, transporting and insuring physical wine collections can be expensive, and you face the risk of bottles being damaged or spoiled.

• Wine generally requires a longer holding period than other investments, which may not be ideal if you don’t want to be “locked in” for a certain time frame.

• Wine investment requires thorough due diligence to ensure that you’re working with a reputable platform, auction house, exchange, or private seller.

• Supply and demand, weather and climate conditions, and geopolitical events can all influence the value of fine wines.

Lastly, remember that nothing is guaranteed with wine or any other alternative asset class, like gold or real estate. While it’s certainly possible to generate substantial returns through wine investments, it can be just as easy to lose money.

Building a Portfolio

There are several ways to build a portfolio that includes wine investments. Your options for investing in wine include:

• Purchasing physical bottles of wine

• Investing in wine funds

• Buying wine stocks

• Investing in wine futures

The first step in building a wine portfolio is deciding which investment option makes the most sense.

Buying Fine Wine

Owning physical wine assets can be time-consuming and expensive, as you’ll need to research the wines you want to buy, arrange for their purchase and delivery, and ensure they’re stored appropriately to prevent spoilage. You may need to insure the wine you buy.

If you’re interested in collecting wines, you may use online or in-person auctions or wine exchanges to seek out your preferred vintages.

Wine Funds and Wine Stocks

Investing in wine funds may be more appealing if you don’t want the burden of maintaining a physical collection, or you want exposure to a diversified mix of wines. Investors can trade mutual funds or exchange-traded funds (ETFs) that include alcohol-producing companies, as well as companies in the wine sector.

It’s also possible to buy individual shares of stock in wineries and wine companies. Getting to know the wine industry, various technologies, and the relevance of different companies and products is key, as it would be when investing in any type of stock.

Wine Investing Platforms

Private placements are another option. Wine investing platforms allow access to actively managed portfolios of fine wines and premium spirits through private placement. One thing to note is that you may need to be an accredited investor to pursue private wine investments. The SEC defines accredited investors as individuals who have:

• Net worth exceeding $1 million (not including their primary residence), OR

• Income over $200,000 individually ($300,000 for married couples) in each of the two prior years, with a reasonable expectation of the same income in future years, OR

• A valid Series 7, Series 65, or Series 82 securities license

Wine Futures

If you’re comfortable with speculative investments, you might consider investing in wine futures. Similar to investing in commodities futures, this strategy involves investing in wines before they’re bottled. You can purchase specific vintages via futures contracts before they’re released, which may allow a competitive edge in the market if those vintages are highly sought after upon release.

As with commodities futures, there can be substantial risks to this strategy. Futures are derivative investments, meaning their value is determined by the price of the underlying asset, i.e., the wine you’re agreeing to trade. And outcomes rely largely on investors making correct assumptions about which commodity prices will move. It’s possible to lose money on futures contracts if you’re expecting prices to increase but they decline instead.

Managing a Wine Investment Portfolio

How you manage wine investments can depend largely on how you own them. If you’re collecting physical bottles, for instance, then your primary considerations include:

• Storage

• Transport, if you need to move your collection or are ready to sell at auction

• Timing and when it makes sense to sell, once a wine matures

• Wine insurance to protect your investment against losses stemming from theft, damage, and other covered perils

With wine funds and stocks, you’ll need to consider diversification and what you’re gaining exposure to, as well as the overall cost of owning those investments. It’s also important to look at the minimum investment required, as well as the holding period where wine funds are concerned.

Wine typically requires longer holding periods than stocks or bonds and you need to be comfortable with how long you may have to wait to sell your investment.

How much of your portfolio should you dedicate to wine investments? The answer can depend on how much money you have to invest, the degree of risk you’re comfortable with, and your goals for investing in wine. There’s no fixed rule of thumb for deciding how much of a portfolio to invest in alternatives. For some investors, 5% is more than enough while others may be comfortable with 10% or more.

Reviewing the entirety of your portfolio, your time horizon for investing, and your goals can give you a better idea of how much to invest in wine.

Explore Alternative Investments With SoFi

Wine is just one way to diversify a portfolio. If you’re ready to explore alternative investments, SoFi Invest offers access to a range of choices, including commodities, private credit, and real estate. Almost anyone can invest, and high net worth isn’t a requirement.

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

FAQ

What factors make wine a viable alternative investment?

Wine is considered an alternative investment thanks to its low correlation with traditional asset classes like stocks and bonds. Investing in wine can act as an inflationary hedge and provide some protection against market volatility. It’s also an opportunity to invest in something you’re passionate about if collecting or enjoying wine is one of your hobbies.

What are the potential risks of investing in fine wines?

The main risks associated with wine investing center on changing valuations and the potential for damage or spoilage of physical wine collections. Changing supply and demand or poor weather can influence wine prices while maintaining a wine inventory has its risks. If you plan to own wines, it’s wise to purchase wine insurance to protect your investment.

How can investors build and manage a diversified wine portfolio?

Building a diversified wine portfolio begins with deciding how you’d prefer to own wines. Physical ownership has its pros and cons and some investors may choose to invest in alt funds, wine stocks, or wine futures instead. Managing your wine investments requires regular review of performance and asset allocation to ensure that you’re maintaining a diversified mix that aligns with your risk tolerance.

Photo credit: iStock/arismart

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.

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.

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

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.

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.

SOIN-Q224-1900882-V1

Jul

2024

Timberland Investment: Benefits and Risks

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

An increasing number of investors looking for diversification and long-term profits have turned their focus to timberland investments, a strategy that involves purchasing and managing forested land for profit.

Timberland provides a special combination of potential long-term land value appreciation, revenue from lumber sales, and in some cases environmental advantages. This strategy also, however, comes with a unique set of risks and challenges owing to climate and geographical factors.

What Exactly Is a Timberland Investment?

Buying forest land with the primary goal of managing and harvesting the timber for profit is known as a forestry investment. Because the growth and production of timber is not correlated with the stock or bond markets, timberland investing is considered an alternative asset class.

It also may be a hedge against inflation, as the demand for lumber and other wood-based products tends to grow over time, and rarely tracks the movement of stock and bond markets.

Periodic wood sales, land value appreciation, and prospective leasing opportunities for recreational use or conservation easements are some of the ways that a timberland investment may pay off over time.

Investments in timberlands that are managed responsibly may yield a renewable resource, and balance commercial interests with environmental management. This asset class combines aspects of real estate and agricultural investment to provide a practical investment in natural resources.

Ways to Invest in Timberland

Large institutional investors like pension funds and universities may own millions of acres of timberland outright. While land management on that scale may be difficult for retail investors, individuals can invest in this asset class through mutual funds as well as exchange-traded funds (ETFs) that are focused on forest land, and companies that supply infrastructure or produce timber-based goods.

REIT investing (real estate investment trusts) is another avenue that individual investors can use to access timberland investing. Certain types of REITs include lumber-producing properties, and related real estate.

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How Can Timberland Be Profitable?

Timberland can be a desirable alternative investment since it can provide income from a number of sources. The main source of income is the recurring sales of harvested timber, which is utilized in many different businesses such as energy, paper, and construction. But timberland offers a range of potential growth opportunities, including:

• The value of timber itself. Trees gain value over time as they grow, and the demand for timber tends to increase as well — a potential upside for investors long term.

• Land value. The land itself may also increase in value over time. By building infrastructure, such as roads, bridges, and trails that increase accessibility and appeal for a variety of applications, investors may also see higher land values, or profits from land use deals.

• Potential for development. After the trees have been harvested, a property may be developed for residential or commercial use.

• Recreational activities. Additionally, timberland can make money through leases for outdoor activities like fishing, hunting, and ecotourism, or by selling carbon credits. While preserving the forest’s natural health, long-term income can be realized through effective management and sustainable methods.

Benefits of Investing in Timberland

There are several advantages to investing in forestry that may provide both financial and environmental benefits. Timber is a tangible good with steady demand in sectors like building, paper, and energy — unlike stocks, which may be volatile and subject to market swings.

As a result, timberland investments typically have a low correlation with traditional asset classes such as stocks and bonds. One of the main advantages of investing in timberland is that it offers portfolio diversification, which can help investors manage risk.

The consistent biological development of trees — which, depending on species, temperature, age, and other factors, increases their volume by an average of 5% annually — makes forest investment attractive. Timberland may yield relatively consistent, long-term profits from the sale of timber, as well as possible increases in property values. As such, it offers a hedge against inflation, as timber prices tend to rise with general price levels.

While not exactly known as a green investing strategy, investments in timberland may promote environmentally sound forestry methods, and aid in carbon sequestration, which improves the ecological health of forests and the planet as a whole.

Additionally, owning timberland may result in tax benefits, such as possible deductions for land management initiatives like conservation easements.

Timberland investors can benefit greatly from the expansion of the housing sector in particular, since they can take advantage of the growing demand for building materials.

Risks and Challenges of Timberland Investing

Although investing in timberland has many advantages, there are also risks and challenges that potential investors need to take into account.

Timber prices may be subject to market volatility, which might result in inconsistent revenue from sales of timber. Furthermore, timberland is an illiquid asset, which means that selling it rapidly without risk of loss is challenging.

Wildfires, pests, and diseases are examples of environmental dangers that can seriously harm wood supplies and lower the investment’s value.

It can be expensive and time consuming to manage a timberland investment because it calls for specific knowledge and constant attention to forestry techniques and markets.

The profitability and operational flexibility of timberland investments may be impacted by modifications to laws and policies pertaining to environmental protection and land use.

Timberland Investing Pros and Cons

Potential Advantages	Risks and Challenges
Portfolio diversification	May succumb to volatility in certain markets
Potential for long-term profits	Highly illiquid
A hedge against inflation	Vulnerable to climate change and environmental risk factors
Environmental benefits	Political issues and land disputes
Potential tax advantages	Management/maintenance costs
Tends to rise with housing market	Regulatory hurdles

Alternative Investments With SoFi

Investing in timberland can be a wise alternative investment, since it can provide income as well as potential profits from a number of sources. And because the demand for timber is typically steady over time, investors in this asset class may be able to enjoy long-term growth.

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

FAQ

What are the key advantages of investing in timberland?

Timberland investments offer several benefits, such as portfolio diversification, inflation protection, the potential for consistent long-term earnings, sustainable forestry, and possible tax advantages.

What are the major risks and challenges of timberland investments?

The major risks and challenges of timberland investments include market fluctuations affecting timber prices, illiquidity of the asset, environmental threats such as wildfires and pests, high management costs, and regulatory changes impacting land use and profitability.

Is timberland investment a good way to diversify?

Investing in forestry may help to lower overall investment risk because it has a low correlation with other conventional asset classes like stocks and bonds.

Photo credit: iStock/SimonSkafar

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.

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.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOIN-Q224-1900857-V1

What Are Brokerage Checking Accounts?

Key Features of Brokerage Checking Accounts

Linked to Brokerage Investment Accounts

Debit/ATM Card Access to Funds

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Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.

Benefits of a Brokerage Checking Account

Easily Move Money Between Investments

Potential for Higher Interest Earnings

Integrated Money Management

Potential Drawbacks

May Require Minimum Balances

Fees for Certain Transactions

No In-Person Service

Eligibility and Account Opening

Comparing To Traditional Checking

The Takeaway

FAQ

What banks offer brokerage checking?

Can I have multiple brokerage checking accounts?

Are brokerage checking accounts FDIC-insured?

What Is a Gold IRA? How Do You Invest in One?

Establishing a Gold IRA Account

Understanding Self-Directed IRAs

Setting Up a Gold IRA Account

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Gold Standards for IRAs

Managing a Gold IRA Portfolio

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FAQ

What types of gold investments can be held in a gold IRA?

How do you set up and fund a gold IRA account?

What are the tax benefits and restrictions associated with a gold IRA?

What Is a Silver IRA? How Do They Work?

Introduction to IRAs Invested in Precious Metals

How a Self-Directed IRA Works

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Establishing a Silver IRA

Requirements for Silver Investments

Managing a Silver IRA Portfolio

Tax Advantages and Drawbacks of Silver IRAs

The Takeaway

FAQ

What types of silver investments are eligible for a silver IRA?

How does the process of establishing and funding a silver IRA work?

What are the potential tax advantages and drawbacks of a silver IRA?

How to Invest in Wine

The Rise of Wine as an Alternative Investment

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Is Wine a Good Investment Option?

Risks and Considerations of Wine Investing

Building a Portfolio

Buying Fine Wine

Wine Funds and Wine Stocks

Wine Investing Platforms

Wine Futures

Managing a Wine Investment Portfolio

Explore Alternative Investments With SoFi

FAQ

What factors make wine a viable alternative investment?

What are the potential risks of investing in fine wines?

How can investors build and manage a diversified wine portfolio?

Timberland Investment: Benefits and Risks

What Exactly Is a Timberland Investment?

Ways to Invest in Timberland

Alternative investments, now for the rest of us.

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

How Can Timberland Be Profitable?

Benefits of Investing in Timberland

Risks and Challenges of Timberland Investing

Timberland Investing Pros and Cons

Alternative Investments With SoFi

FAQ

What are the key advantages of investing in timberland?

What are the major risks and challenges of timberland investments?

Is timberland investment a good way to diversify?

Alternative investments,
now for the rest of us.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.¹

Alternative investments,
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