Mar
21
2025

Value vs Growth Stocks

By | Growing Wealth, invest, Investing | Comments Off on Value vs Growth Stocks

Generally speaking, value stocks are shares of companies that have fallen out of favor and are valued less than their actual worth. Growth stocks are shares of companies that demonstrate a strong potential to increase earnings, thereby ramping up their stock price.

The terms value and growth refer to two categories of stocks, as well as two contrasting investment “styles”: value can be lower risk with a focus on longer-term returns; growth can be higher risk, with a focus on higher, short-term returns.

Each style has pros and cons. When value investing, investors can buy shares (or fractional shares) of a company that has strong fundamentals at bargain prices. However, investors must be careful not to fall into a “value trap”: i.e., buying stocks that appear to be a bargain, but are actually trading at a discount due to poor fundamentals.

Key Points

•   Value stocks represent undervalued assets, while growth stocks indicate potential for significant price increases.

•   Established companies may offer value stocks, whereas growth stocks usually stem from emerging, rapidly expanding businesses.

•   Dividends are more common with value stocks, as growth stocks frequently retain earnings for reinvestment.

•   Long-term gains are the focus of value investing, contrasting with the short-term appreciation sought in growth investing.

•   Volatility tends to be lower in value stocks and higher in growth stocks, reflecting different risk profiles.

What Are Value Stocks?

Value stocks are stocks that tend to be relatively cheap, or that investors believe aren’t receiving a fair market valuation. In other words, investors think that a stock may be undervalued by the market. Value investors try to identify value stocks by examining quarterly and annual financial statements and comparing what they see to the price the stock is getting on the market.

Investors will also look at a number of valuation metrics to determine whether the stock is lower cost relative to its own trading history, its industry, and other benchmarks, such as the S&P 500 index.

Key Characteristics of Value Stocks

Value stocks tend to have a few underlying characteristics that may lead investors to believe that they’re undervalued.

For example, investors often look at price-to-earnings (P/E) ratio, which is the ratio of price per share over earnings per share. Some experts say that a value stock’s P/E should be 40% less than the stock’s highest P/E in the previous five years.

Investors may also look at price-to-book, which is the price per share over book value per share. A stock’s book value is a company’s total assets minus its liability and provides an estimate of a company’s value if it were liquidated.

Value investors are hoping to buy a quality stock when its price is in a temporary lull, holding it until the stock market corrects and the stock price goes up to a point that better reflects the underlying value of the company.

What Could Make a Stock Undervalued?

There are a number of reasons that a stock could be undervalued.

•   A stock could be cyclical, meaning it’s tied to the movements of the market. While the company itself might be strong, market fluctuations may temporarily cause its price to dip.

•   An entire sector of the market could be out of favor, causing the price of a specific stock to dip. For example, a pharmaceutical company with an effective new drug might be priced low if the health care sector is generally on the outs with investors.

•   Bad press or a negative news cycle could cause share prices to drop.

•   Companies can simply be overlooked by investors looking in a different direction.

Examples of Well-Known Value Stocks

As of early 2025, here are five examples of top-performing value stocks, according to Morningstar. But remember, there’s no guarantee that any of these stocks, or any stock for that matter, will appreciate.

•   JPMorgan Chase

•   Walmart

•   UnitedHealth Group

•   International Business Machines (IBM)

•   Wells Fargo

What Are Growth Stocks?

Growth stocks are shares of companies that demonstrate the potential for high earnings or sales. These companies tend to reinvest their earnings back into their business to spur their company’s growth, as opposed to paying out dividends to shareholders.

Growth investors are betting that a company which is growing fast now, will continue to grow quickly in the future. But the risk is that investors jumping into growth stocks may be buying a stock that is already valued relatively high. In doing so, they could lose a potentially significant amount of money if prices to tumble in the future.

Key Characteristics of Growth Stocks

To spot growth stocks, investors can look for companies that are not only expanding rapidly but may be leaders in their industry. For example, a company may have developed a new technology that gives it a competitive edge over similar companies.

There are also a number of metrics growth investors could examine to help them identify growth stocks. First, investors may look at price-to-sales (P/S), or price per share over sales per share. Not all growth companies are profitable, and P/S allows investors to see how quickly a company is expanding without factoring in its costs.

Investors may also look at price-to-earnings growth (PEG), which is P/E over projected earnings growth. A PEG of 1 or more typically suggests that investors are overvaluing a stock, while PEG of less than one may mean the stock is relatively cheap. PEG is a useful metric for investors who want to consider both value and growth investing.

Key Differences Between Value and Growth Stocks

The main difference between value and growth stocks mostly concerns their current valuation. As discussed, investors believe that value stocks are undervalued at a certain point in time, and believe the stock could appreciate over time.

Growth stocks, on the other hand, may not be undervalued, but are expected to appreciate relatively quickly over the short or medium term.

With that in mind, some other differences between the two could include relative risk; value stocks may be less risky than growth stocks, which can be more volatile. Further, value stocks may be shares of older more established companies, which could also offer dividends (but have lower earnings growth). The opposite might be true for growth stocks.

Performance in Bull vs. Bear Markets

Given relative risk factors and volatility in relation to growth and value stocks, investors might expect that value stocks would perform better than growth stocks during bear markets. The inverse could be true for bull markets. But again, nothing is guaranteed.

Investment Horizon for Value vs Growth

Investors may also want to consider their strategy and time horizon when deciding whether a value or a growth strategy makes more sense for them.

Specifically, value stocks may be better suited for investors with long-term strategies, while growth may be better for those with shorter time horizons. Naturally, a mix of the two, to some degree, is likely an ideal route for most investors, but it may be worth speaking with a financial professional for guidance.

How Are Growth and Value Strategies Similar?

While growth and value investing are two different investment strategies, distinctions between the two are not hard and fast; there can be quite a bit of overlap. Investors may see that stocks listed in a growth fund are also listed in a value fund depending on the criteria used to choose the stock.

What’s more, growth stocks may evolve into value stocks, and value stocks can become growth stocks. For example, say a small technology company develops a new product that attracts a lot of investor attention. It might start to use that capital to grow its business more quickly, shifting from value to growth.

Investors practicing growth and value strategies also have the same end goal in mind: They want to buy stocks when they are relatively cheap and sell them again when prices have gone up. Value investors are simply looking to do this with companies that are already on solid financial footing, and hopefully, see stock price appreciation should rise as a result.

Growth investors are looking for companies with a lot of growth potential, whose stock price will hopefully rise quickly.

Using Growth and Value Strategies Together

The stock market goes through natural cycles during which either growth or value stocks will be up. Investors who want to capture the potential benefits of each may choose to employ both strategies over the long term. Doing so may add diversity to an investor’s portfolio and head off the temptation to chase trends if one style pulls ahead of the other.

Investors who don’t want to analyze individual stocks for growth or value potential can access these strategies through growth or value mutual funds. Because of the cyclical nature of growth and value investing, investors may want to keep a close eye on their portfolios to ensure they stay balanced — and consider rebalancing their portfolio if market cycles shift their asset allocation.

Balancing Risk With Growth and Value Investments

As noted, it may be a good strategy to find some sort of balance between value and growth assets in your portfolio. This adds a degree of diversification, naturally, but given your personal risk tolerance and time horizon, there may be advantages to balancing your portfolio more toward growth or value — it’ll depend on your specific situation.

Again, this may be worth a conversation with a financial professional, who can help with some additional guidance. But given prevailing, changing market conditions and more variables, it can also be a good idea to regularly check in and rebalance your portfolio.

The Takeaway

Growth and value are different strategies for investing in stocks. Investing in growth stocks is considered a bit riskier, though it also may provide potentially higher returns than value investing. That said, growth stocks have not always outperformed value stocks. Value stocks may be purchased for less than they’re worth, tend to be lower risk, and may offer investors some appreciation over time.

As a result, some investors may choose to build a diversified portfolio that includes each style so they have a better chance of reaping benefits when one is outperforming the other.

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

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

FAQ

What is the main difference between value and growth stocks?

Value stocks are considered to be undervalued by investors, whereas growth stocks have an expectation of short-term growth or appreciation.

Can growth stocks turn into value stocks over time?

Yes, growth stocks may turn into value stocks over time, and value stocks may turn into growth stocks. They are fluid, in that sense.

How can beginners balance growth and value investments?

Perhaps the easiest way for beginners to balance growth and value investments is to diversify their portfolios through index or mutual funds, which may include a mix of both types of investments.

Which strategy works better in a recession?

While nothing is guaranteed or for certain, it may be a better bet to stick to a value strategy during a recession or economic downturn, as value stocks tend to have less volatility and risk than growth stocks.

How do dividends impact value and growth stocks?

Many growth stocks may not offer dividends, as those companies may instead be focused on growth and reinvesting their profits. Value stocks, on the other hand, tend to offer dividends, as they’re not necessarily in “growth mode,” and are in the practice of returning value to shareholders.

SoFi Invest®

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

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

Mutual Funds (MFs): 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 clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

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

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

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

SOIN-Q125-078

Read more
Mar
21
2025
Guide to Cash Balance Pension Plans

Guide to Cash Balance Pension Plans

By | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off on Guide to Cash Balance Pension Plans

A cash balance pension plan is a defined benefit plan that offers employees a stated amount at retirement. The amount of money an employee receives can be determined by their years of service with the company and their salary. Employers may offer a cash balance retirement plan alongside a 401(k) or in place of one.

If you have a cash balance plan at work, it’s important to know how to make the most of it when preparing for retirement. Read on to learn more about what a cash balance pension plan is and the pros and cons.

What Are Cash Balance Pension Plans?

A cash balance pension plan is a defined benefit plan that incorporates certain features of defined contribution plans. Defined benefit plans offer employees a certain amount of money in retirement, based on the number of years they work for a particular employer and their highest earnings. Defined contribution plans, on the other hand, offer a benefit that’s based on employee contributions and employer matching contributions, if those are offered.

In a cash balance plan, the benefit amount is determined based on a formula that uses pay and interest credits. This is characteristic of many employer-sponsored pension plans. Once an employee retires, they can receive the benefit defined by the plan in a lump sum payment.

This lump sum can be rolled over into an individual retirement account (IRA) or another employer’s plan if the employee is changing jobs, rather than retiring. Alternatively, the plan may offer the option to receive payments as an annuity based on their account balance.

Get a 1% IRA match on rollovers and contributions.

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

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.

How Cash Balance Pension Plans Work

Cash balance pension plans are qualified retirement plans, meaning they’re employer-sponsored and eligible for preferential tax treatment under the Internal Revenue Code. In a typical cash balance retirement plan arrangement, each employee has an account that’s funded by contributions from the employer. There are two types of contributions:

•   Pay credit: This is a set percentage of the employee’s compensation that’s paid into the account each year.

•   Interest credit: This is an interest payment that’s paid out based on an underlying index rate, which may be fixed or variable.

Fluctuations in the value of a cash pension plan’s investments don’t affect the amount of benefits paid out to employees. This means that only the employer bears the investment risk.

Here’s an example of how a cash balance pension works: Say you have a cash balance retirement plan at work. Your employer offers a 5% annual pay credit. If you make $120,000 a year, this credit would be worth $6,000 a year. The plan also earns an interest credit of 5% a year, which is a fixed rate.

Your account balance would increase year over year, based on the underlying pay credits and interest credits posted to the account. The formula for calculating your balance would look like this:

Annual Benefit = (Compensation x Pay Credit) + (Account Balance x Interest Credit)

Now, say your beginning account balance is $100,000. Here’s how much you’d have if you apply this formula:

($120,000 x 0.05) + ($100,000 x 1.05) = $111,000

Cash balance plans are designed to provide a guaranteed source of income in retirement, either as a lump sum or annuity payments. The balance that you’re eligible to receive from one of these plans is determined by the number of years you work, your wages, the pay credit, and the interest credit.

Cash Balance Plan vs 401(k)

Cash balance plans and 401(k) plans offer two different retirement plan options. It’s possible to have both of these plans through your employer or only one.

In terms of how they’re described, a cash balance pension is a defined benefit plan while a 401(k) plan is a defined contribution plan. Here’s an overview of how they compare:

Cash Balance Plan

 401(k)
Funded By Employer contributions Employee contributions (employer matching contributions are optional)
Investment Options Employers choose plan investments and shoulder all of the risk Employees can select their own investments, based on what’s offered by the plan, and shoulder all of the risk
Returns Account balance at retirement is determined by years of service, earnings, pay credit, and interest credit Account balance at retirement is determined by contribution amounts and investment returns on those contributions
Distributions Cash balance plans must offer employees the option of receiving a lifetime annuity; can also be a lump sum distribution Qualified withdrawals may begin at age 59 ½; plans may offer in-service loans and/or hardship withdrawals

Pros & Cons of Cash Balance Pension Plans

A cash balance retirement plan can offer both advantages and disadvantages when planning your retirement strategy. If you have one of these plans available at work, you may be wondering whether it’s worth it in terms of the income you may be able to enjoy once you retire.

Here’s more on the pros and cons associated with cash balance pension plans to consider when you’re choosing a retirement plan.

Pros of Cash Balance Pension Plans

A cash balance plan can offer some advantages to retirement savers, starting with a guaranteed benefit. The amount of money you can get from a cash balance pension isn’t dependent on market returns, so there’s little risk to you in terms of incurring losses. As long as you’re still working for your employer and earning wages, you’ll continue getting pay credits and interest credits toward your balance.

From a tax perspective, employers may appreciate the tax-deductible nature of cash balance plan contributions. As the employee, you’ll pay taxes on distributions but tax is deferred until you withdraw money from the plan.

As for contribution limits, cash balance plans allow for higher limits compared to a 401(k) or a similar plan. For 2024, the maximum annual benefit allowed for one of these plans is $275,000. For 2025, the maximum annual benefit allowed is $280,000.

When you’re ready to retire, you can choose from a lump sum payment or a lifetime annuity. A lifetime annuity may be preferable if you’re looking to get guaranteed income for the entirety of your retirement. You also have some reassurance that you’ll get your money, as cash balance pension plans are guaranteed by the Pension Benefit Guaranty Corporation (PBGC). A 401(k) plan, on the other hand, is not.

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

Cons of Cash Balance Pension Plans

Cash balance pension plans do have a few drawbacks to keep in mind. For one, the rate of return may not be as high as what you could get by investing in a 401(k). Again, however, you’re not assuming any risk with a cash balance plan so there’s a certain trade-off you’re making.

It’s also important to consider accessibility, taxation, and fees when it comes to cash balance pension plans. If you need to borrow money in a pinch, for example, you may be able to take a loan from your 401(k) or qualify for a hardship withdrawal. Those options aren’t available with a cash balance plan. And again, any money you take from a cash balance plan would be considered part of your taxable income for retirement.

Pros Cons

•   Guaranteed benefits with no risk

•   Tax-deferred growth

•   Flexible distribution options

•   Higher contribution limits

•   Guaranteed by the PBGC

•   Investing in a 401(k) may generate higher returns

•   No option for loans or hardship withdrawals

•   Distributions are taxable

Investing for Retirement With SoFi

A cash balance retirement plan is one way to invest for retirement. It can offer a stated amount at retirement that’s based on your earnings and years of service. You can opt to receive the funds as either a lump sum or an annuity. Your employer may offer these plans alongside a 401(k) or in place of one, and there are pros and cons to each option to weigh.

If you don’t have access to either one at work, you can still start saving for retirement with an IRA. You can set aside money on a tax-advantaged basis and begin to build wealth for the long-term.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Help grow your nest egg with a SoFi IRA.

FAQ

Is a cash balance plan worth it?

A cash balance plan can be a nice addition to your retirement strategy if you’re looking for a source of guaranteed income. Cash balance plans can amplify your savings if you’re also contributing to a 401(k) at work or an IRA.

Is a cash balance plan the same as a pension?

A cash balance plan is a type of defined benefit plan or pension plan, in which your benefit amount is based on your earnings and years of service. This is different from a 401(k) plan, in which your benefit amount is determined by how much you (and possibly your employer) contribute and the returns on those contributions.

Can you withdraw from a cash balance plan?

You can withdraw money from a cash balance plan in a lump sum or a lifetime annuity once you retire. You also have the option to roll cash balance plan funds over to an IRA or to a new employer’s qualified plan if you change jobs.

About the author

Rebecca Lake

Rebecca Lake

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


Photo credit: iStock/sturti


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.


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.

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.

SoFi Invest®

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

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

SOIN0124106

Read more
Mar
20
2025
What Is a Naked Put Options Strategy?

What Is a Naked Put Options Strategy?

By | Growing Wealth, invest, Investing | Comments Off on What Is a Naked Put Options Strategy?

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

A naked put option, also known as an “uncovered put,” is a risky options strategy in which a trader writes (i.e. sells) a put option with no corresponding short position in the underlying asset. This strategy allows the trader to collect the option premium upfront, while anticipating that the underlying asset will rise in value. A naked put carries significant downside loss potential should the price of the underlying asset decline.

Key Points

•   Naked put options involve selling a put without having a short position in the underlying asset.

•   Naked put investors aim to profit from premium collection, while facing the potential for significant losses if the stock price drops.

•   Approval for margin trading is necessary to engage in naked put options.

•   Covered puts offer a hedge against losses by holding a short position in the underlying stock.

•   Risk is limited to the difference between the option’s strike price and the market price, minus the premium received.

Understanding Naked Put Options

As a refresher, the buyer of a put option has the right, but not the obligation, to sell an underlying security at a specific price, called the strike price. On the flip side, the seller of a put option is obliged to purchase the underlying asset at the strike price if and when the option buyer chooses to exercise.

Writing a naked put means that the trader is betting that the underlying security will rise in value or hold steady. If, at the option’s expiration date, the price of the underlying security is above the strike price, the options contract will expire worthless, allowing the seller to keep the premium. The potential profit of the trade is capped at the initial premium collected.

The risk of a naked put option trade is that the potential losses can be much greater than the premium initially gained. If the price of the underlying security declines below the strike price, the option seller can be forced to take assignment of shares in the underlying security.

Taking assignment means that the seller must buy (typically) 100 shares of the underlying stock, per the options contract, at the strike price and regardless of the stock’s market value. The options seller would then have to either hold those shares, or sell them in the open market at a loss (since they were obligated to purchase them at the higher strike price).

Recommended: Buying Options vs. Stocks: Trading Differences to Know

Requirements for Trading Naked Put Options

Investors have to clear some hurdles before being able to engage in a naked put transaction.

Typically, that begins with getting cleared for margin trading by their broker or investment trading firm. A margin account allows an investor to be extended credit from their trading firm in order to actually sell a naked put.

There are two main requirements to be approved for a margin account in order to trade naked put options.

•   The investor must demonstrate the financial assets to cover any portfolio trading losses.

•   The investor must declare they understand the risks inherent when investing in derivative trading, including naked put options.

These requirements can vary depending on the broker and are also subject to regulatory oversight.

Selling Naked Puts

A trader initiates a naked put by selling (writing) a put option without an accompanying short position in the underlying asset.

From the start of the trade until the option expires, the investor keeps a close eye on the underlying security, hoping it rises in value, which would result in a profit for them. If that security loses value, the investor may have to buy the underlying security at the higher strike price to cover the position, in the event that the buyer of the put option chooses to exercise.

With a naked put option, the maximum profit is limited to the premium collected up front, and is obtained if the underlying security’s price closes either at or above the option contract’s strike price at the expiration date. If the underlying security loses value, or worse, the value of the underlying security plummets to $0, the financial loss can be substantial.

Naked Versus Covered Puts

As mentioned above, in a naked put, the trader has no corresponding short position in the underlying asset. This distinction is important due to the differences between naked and covered puts.

A covered put means the put option writer has a short position in the underlying stock. As a reminder, a short position means that the investor has borrowed shares of a security and sold them on the open market, with the plan of buying them back at a lower price.

This changes the dynamics of the trade, as a covered put involves holding a short position in the underlying asset. This offsets losses from the put option if the asset price falls. If the price of the underlying security declines, losses incurred on the put option will be offset by gains on the short position. However, the risk instead is that the price of the underlying security could move significantly upward, incurring losses on the underlying short position.

Recommended: The Risks and Rewards of Naked Options

Example of a Naked Put Option

Here’s an example of how trading a naked put can work:

A stock is trading at $50 per share. A trader opts to sell a put option expiring in 30 days with a strike price of $50 for a premium of $4. Typically, when trading equity options, a single contract controls 100 shares – so the total premium, their initial gain, is $400. If the price of the stock is above $50 after 30 days, the option would expire worthless, and the trader would keep the entire $400 premium.

To look at the downside scenario, suppose the stock’s price falls to $40. In this case, the trader would be required to buy shares in the stock at $50 (the strike price), but the market value of those shares is only $40. They can sell them on the open market, but will incur a loss of $10 per share. The trader’s loss on the sale is $1,000 (100 x $10), but is offset by the premium gained on the sale of the option, bringing her net loss to $600. Alternatively, the trader could choose not to sell the shares, but hold them instead, in the hope that they will appreciate in value.

There’s also a break-even point in this trade that investors should understand. Imagine that the stock slides from $50 to $46 per share over the next 30 days. In this case, the trader loses $400 ($4 per share) after buying the shares at $50 and selling them at $46, which is offset by the $400 gained on the premium.

The maximum potential loss in any naked put option sale occurs if the stock’s stock price goes to $0. In this instance, the loss would be $5,000 ($50 per share x 100 shares), offset by the $400 premium for a net loss of $4,600. Practically speaking, a trader would likely repurchase the option and close the trade before the stock falls too significantly. This can depend on a trader’s risk tolerance, and the stop-loss setting on the trade.

The Takeaway

The big risk of a naked put option trade is that the potential losses can be much greater than the premium initially gained, while the maximum profit is limited to the premium collected up front. The seller of an uncovered put thinks the underlying asset will rise in value or hold steady.

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.

Photo credit: iStock/damircudic

SoFi Invest®

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

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

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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.

SOIN-Q125-116

Read more
Mar
20
2025
What Is a Backdoor Listing? Definition and How It Works

What Are Backdoor Listings? Definition and How It Works

By | Growing Wealth, invest, Investing | Comments Off on What Are Backdoor Listings? Definition and How It Works

A backdoor listing can allow a private company to become publicly traded, without having to pursue an initial public offering (IPO). This strategy can be less time- and cost-intensive for companies that are interested in being listed on a public stock exchange.

There are different ways backdoor listings can occur. A key question for investors is whether it makes sense to invest in stocks associated with a backdoor company.

What Is a Backdoor Listing?

In most cases, a company that wants to make its shares available for trade on a stock exchange would go through an initial public offering, or IPO. This process, regulated by the Securities and Exchange Commission (SEC), ensures that companies meet certain requirements before they can be listed on the Nasdaq or the New York Stock Exchange (NYSE).

A backdoor listing allows companies to list shares of stock on a public exchange while circumventing the traditional IPO process. These companies effectively go through the “back door” to get their shares listed. Some investors also call this process a reverse listing, reverse IPO, a reverse takeover or a backdoor to the trade.


💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.

How Do Backdoor Listings Work?

Generally speaking, a backdoor list transaction allows companies to go public without the usual IPO requirements. There are typically three strategies private companies use to pursue a backdoor listing.

•   Reverse merger/takeover. In a reverse merger or reverse takeover, a private company purchases a majority shareholder interest in a publicly-traded company in exchange for shares in the public company. The two companies then merge, operating under the name of the publicly-traded company going forward.

•   Shell company. In some cases, the backdoor company may wish to continue doing business independently, even after completing a reverse merger or takeover. To do this, they create a shell company, that allows both the formerly private company and the publicly-traded company it acquired or merged with to continue operations.

•   SPAC. This strategy essentially combines the other two. A SPAC is a “special purpose acquisition corporation,” a shell company created specifically to purchase a private company. The SPAC goes public and then uses the proceeds from its IPO to purchase a private company.

Recommended: What You Need to Know Before Investing in SPACs

Each approach offers a shortcut to trading on a public exchange for private companies. In the case of a reverse merger, the private company would gain control of the public company’s board of directors. Depending on the terms of a backdoor listing, this can result in a restructuring or reorganization of the public company it acquired.

Backdoor Listing Example

It can be helpful to have a real-world example of a backdoor listing to better understand how they work. One high-profile instance of a backdoor listing over the last decade involved the reverse merger of T-Mobile USA with MetroPCS in 2013.

In that deal, MetroPCS declared a 1-for-2 reverse split of its stock, while paying out $1.5 billion in cash to its shareholders. T-Mobile USA assumed a 74% ownership stake in the company, a deal approved by MetroPCS shareholders. Following the reverse takeover, MetroPCS stock began trading under the symbol TMUS.

Using a more general example, Company A may wish to go public but not meet the SEC’s IPO requirements for size or valuation. Instead, it chooses to buy a majority ownership stake in its competitor, Company B, which trades on the NYSE. Following the reverse merger, Company A assumes Company B’s name and is now a publicly-traded stock.

Advantages of Backdoor Listings

Private companies may prefer a backdoor listing for several reasons, including:

•   Capital preservation. Filing an IPO involves numerous costs, including underwriting fees and SEC registration fees. This can amount to millions, or tens of millions of dollars in some cases. Choosing a backdoor IPO could yield substantial cost savings for private companies.

•   Speed. The traditional IPO timeline can take anywhere from six months to a year to complete, owing to the various steps in the process that must be completed. On the other hand, companies can complete a reverse takeover, in as little as a few weeks, allowing private companies to go public at a much faster pace.

•   Avoiding IPO valuation rules. The SEC has some strict guidelines with regard to things like how IPO valuations are set. By going through the backdoor to the trade, companies can sidestep these requirements altogether.

•   Skipping the lockup period. Early investors and employees typically can’t trade their stocks during a certain period before and after a traditional IPO. Companies that use a backdoor IPO typically don’t impose such restrictions on shareholders.

•   IPO failure. Companies may also turn to a backdoor listing if they had an unsuccessful IPO.

There can also be advantages for the original shareholders of a backdoor company. If a reverse IPO boosts the share value of the newly merged company, that can increase the value of shareholders’ equity.

Disadvantages of Backdoor Listings

Backdoor listings also pose some potential problems for the private company executing it and the publicly-traded company it acquires. Some of the key issues that may result from a backdoor listing include:

•   Share dilution. Share dilution occurs when a public company issues new shares to the market, which can sometimes happen in a reverse takeover. This may decrease the value of equity for shareholders who already own stock in the company.

•   Incompatibility. It’s also possible that a backdoor listing fails to yield sufficient benefits for both companies involved.In that case, rather than driving profits up, a reverse IPO could result in financial losses.


💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

What Do Backdoor Listings Mean for IPO Investors?

Buying IPO stocks may appeal to investors who want to get in on the ground floor of a company that’s going public. If an IPO takes off, early investors could reap significant rewards later if they’re able to sell their shares at a profit down the line.

Backdoor listings can mean fewer opportunities to invest in IPOs. They’re not, however, shut out from trading stocks upon completion of the merger. Say, for example, there’s a private company you’ve been hoping will go public. Instead of launching an IPO, the company chooses to execute a reverse takeover instead.

You may be able to capitalize on that by purchasing shares of the public company it plans to merge with ahead of a reverse IPO. Or you may wait until the dust settles on a backdoor listing to invest in the newly merged company. In either case, the opportunity to invest in the private company you had your eye on isn’t lost. It simply takes on a new form.

Recommended: SPAC IPO vs. Traditional IPO: Pros and Cons of Investing in Each

The Takeaway

Backdoor listings allow a private company to become publicly traded, without having to pursue an IPO through traditional means. There can be advantages to going public via a backdoor listing, and it may be used as a way to speed up the process or to IPO in a less expensive way.

For investors, knowing about backdoor listings can simply be another way to be privy to new company shares hitting the stock exchanges. But investing in companies that are fresh to public markets has considerable risk. It can be attractive, but investors would do well to think their investment choices through before investing. It may also be worthwhile to speak with a financial professional for advice.

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.

About the author

Rebecca Lake

Rebecca Lake

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


Photo credit: iStock/NeoLeo

SoFi Invest®

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

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

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

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

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

SOIN0723034

Read more
Mar
20
2025
Avoid These 12 Common Retirement Mistakes

12 Common Retirement Mistakes You Should Avoid

By | invest, Investing, Preparing for Retirement | Comments Off on 12 Common Retirement Mistakes You Should Avoid

Part of planning for a secure future is knowing what retirement mistakes to avoid that could potentially cost you money. Some retirement planning mistakes are obvious; others you may not even know you’re making.

Being aware of the main pitfalls, or addressing any hurdles now, can help you get closer to your retirement goals, whether that’s traveling around the world or starting your own business.

Planning for Retirement

Knowing what not to do in retirement planning is just as important as knowing what you should do when working toward financial security. Avoiding mistakes when creating your retirement plan matters because of how those mistakes could affect you financially over the long term.

The investment choices someone makes in their 20s, for example, can influence how much money they have saved for retirement by the time they reach their 60s.

The younger you are when you spot any retirement mistakes you may have made, the more time you have to correct them. Remember that preparing for retirement is an ongoing process; it’s not something you do once and forget about. Taking time to review and reevaluate your retirement-planning strategy can help you to pinpoint mistakes you may need to address.

12 Common Retirement Planning Mistakes

There’s no such thing as a perfect retirement plan — everyone is susceptible to making mistakes with their investment strategy. Whether you’re just getting started or you’ve been actively pursuing your financial goals for a while, here are some of the biggest retirement mistakes to avoid — in other words, what not to do in retirement planning.

1. Saving Too Late

There are many retirement mistakes to avoid, but one of the most costly is waiting to start saving — and not saving automatically.

Time is a vital factor because the longer you wait to begin saving for retirement, whether through your 401(k) or an investment account, the less time you have to benefit from the power of compounding returns. Even a delay of just a few years could potentially cost you thousands or even hundreds of thousands of dollars in growth.

Here’s an example of how much a $7,000 annual contribution to an IRA that’s invested in mutual funds might grow by age 65. (Estimates assume a 7% annual return.)

•   If you start saving at 25, you’d have $1,495, 267

•   If you start saving at 35, you’d have $707,511

•   If you start saving at 45, you’d have $307,056

As you can see, waiting until your 40s to start saving would cost you more than $1 million in growth. Even if you get started in your 30s, you’d still end up with less than half the amount you’d have if you start saving at 25. The difference underscores the importance of saving for retirement early on — and saving steadily.

This leads to the other important component of being an effective saver: Taking advantage of automatic savings features, like auto transfers to a savings account, or automatic contributions to your retirement plan at work. The less you have to think about saving, and the more you use technology to help you save, the more money you may be able to stash away.

2. Not Making a Financial Plan

Saving without a clear strategy in mind is also among the big retirement planning mistakes. Creating a financial plan gives you a roadmap to follow because it requires you to outline specific goals and the steps you need to take to achieve them.

Working with a financial planner or specialist may help you get some clarity on what your plan should include.

3. Missing Out on Your 401(k) Match

The biggest 401(k) mistake you can make is not contributing to your workplace plan if you have one. But after that, the second most costly mistake is not taking advantage of 401(k) employer matching, if your company offers it.

The employer match is essentially free money that you get for contributing to your plan. The matching formula is different for every plan, but companies typically match anywhere from 50% to 100% of employee contributions, up to 3% to 6% of employees’ pay.

A common match, for example, is for an employer to match 50% of the first 6% the employee saves. If the employee saves only 3% of their salary, their employer will contribute 50% of that (or 1.5%), for a total contribution rate of 4.5%. But if the employee saves 6%, they get the employer’s full match of 3%, for a total of 9%.

Adjusting your contribution limit so you get the full match can help you avoid leaving money on the table.

4. Bad Investing Strategies

Some investing strategies are designed to set you up for success, based on your risk tolerance and goals. A buy-and-hold strategy, for example, might work well for you if you want to purchase investments for the long term.

But bad investment strategies can cause you to fall short of your goals, or worse, cost you money. Some of the worst investment strategies include following trends without understanding what’s driving them, or buying high and selling low out of panic.

Taking time to explore different investment strategies can help you figure out what works for you.

5. Not Balancing Your Portfolio

Diversification is an important investing concept to master. Diversifying your portfolio means holding different types of investments, and different asset classes. For example, that might mean a mix of stocks, bonds, and cash.

So why does this matter? One reason: Diversifying your portfolio is a form of investment risk management. Bonds, for instance, may act as a balance to stocks as they generally have a lower risk profile. Real estate investment trusts (REITs) may be a hedge against inflation and has low correlation with stocks and bonds, which might provide protection against market downturns. However, it’s important to understand that diversification does not eliminate risk.

Balancing your holdings through diversification — and rebalancing periodically — could help you maintain an appropriate mix of investments to better manage risk. When you rebalance, you buy or sell investments as needed to bring your portfolio back in line with your target asset allocation.

💡 Quick Tip: For investors who want a diversified portfolio without having to manage it themselves, automated investing could be a solution (although robo advisors typically have more limited options and higher costs). The algorithmic design helps minimize human errors, to keep your investments allocated correctly.

6. Using Retirement Funds Too Early

Although the retirement systems in the U.S. are generally designed to help protect your money until you retire, it’s still possible to take early withdrawals from personal retirement accounts like your 401(k) or IRA, or claim Social Security before you’ve reached full retirement age.

•   Your 401(k) or IRA are designed to hold money you won’t need until you retire. Take money from either one before age 59 ½ and you could face a tax penalty. For example, 401(k) withdrawal penalties typically require you to pay a 10% early withdrawal tax on distributions. You’re also required to pay regular income tax on the money you withdraw, regardless of when you withdraw it.

Between income tax and the penalties, you might be left with a smaller amount of cash than you were expecting. Not only that, but your money is no longer growing and compounding for retirement. For that reason, it’s better to leave your 401(k) or IRA alone unless it’s absolutely necessary to cash out early.

And remember that if you change jobs, you can always roll over your 401(k) to another qualified plan to preserve your savings.

•   Similarly, your Social Security benefits are also best left alone until you reach full retirement age, as you can get a much higher payout. Full retirement age is 67 for those born in 1960 or later.

That said, many retirees who need the income may feel compelled to take Social Security as soon as it’s available, at age 62 — but their monthly check will be about 30% lower than if they’d waited until full retirement age. If you can, wait to claim your benefits and you’ll typically get substantially more.

7. Not Paying Off Debt

Debt can be a barrier to your retirement savings goals, since money used to pay down debt each month can’t be saved and invested for the future.

So should you pay off debt or invest first? As you’ve seen, waiting to start saving for retirement can be a mistake if it potentially costs you growth in your portfolio. However, it’s critical to pay off debt, too. If you’d like to get rid of your debt ASAP, consider how you can still set aside something each payday for retirement.

Contributing the minimum amount allowed to your 401(k), or putting $50 to $100 a month in an IRA, can add up over time. As you get your debts paid off, you can begin to divert more money to retirement savings.

8. Not Planning Ahead for Future Costs

Another mistake to avoid when starting a retirement plan is not thinking about how your costs may change as you get older. Creating an estimated retirement budget can help you get an idea of what your day to day living expenses might be. But it’s also important to consider the cost of health care, specifically, long-term care.

Medicare can cover some health expenses once you turn 65, but it won’t pay for long-term care in a nursing home. If you need long-term care, the options for paying for it include long-term care insurance, applying for Medicaid, or paying out of pocket.

Thinking ahead about those kinds of costs can help you develop a plan for paying for them should you require long-term care as you age. How do you know if you’ll need long-term care? You can consider the longevity factors in your family, as well as your own health, and gender. Women tend to live longer than men do, almost 6 years longer, which often puts older women in a position of needing long-term care.

9. Not Saving Aggressively Enough

How much do you need to save for retirement? It’s a critical question, and it depends on several things, including:

•   The age at which you plan to retire

•   Your potential lifespan

•   Your cost of living in retirement (i.e. your lifestyle)

•   Your investment strategy

Each of these factors requires serious thought and possibly professional advice in order to come up with estimates that align with your unique situation. Investing in the resources you need to understand these variables may be one of the most important moves you can make, because the bottom line is that if you’re not saving enough, you could outlive your savings.

10. Making Unnecessary Purchases

If you need to step up your savings to keep pace with your goals, cutting back on spending may be necessary. That includes cutting out purchases you don’t really need to make — but also learning how to be a smarter spender.

Splurging on new furniture or spending $5,000 on a vacation might be tempting, but consider what kind of trade-off you could be making with your retirement. Investing that $5,000 into an IRA means you’ll miss the trip, but you’ll get a better return for your money over time.

11. Buying Into Scams

Get-rich-quick schemes abound, but they’re all designed to do one thing: rob you of your hard-earned money. Investment and retirement scams can take different forms and target different types of investments, such as real estate or cryptocurrency. So it’s important to be wary of anything that promises “free money,” “200% growth,” or anything else that seems too good to be true.

The Federal Trade Commission (FTC) offers consumer information on the most common investment scams and how to avoid them. If you think you’ve fallen victim to an investment scam you can report it at the FTC website.

12. Gambling Your Money

Gambling can be risky as there’s no guarantee that your bets will pay off. This is true whether you’re buying lottery tickets, sitting down at the poker table in Vegas, or taking a risk on a new investment that you don’t know much about.

Either way, you could be making a big retirement mistake if you end up losing money. Before putting money into crazy or wishful-thinking investments, it’s a good idea to do some research first. This way, you can make an informed decision about where to put your money.

Investing for Retirement With SoFi

Retirement planning isn’t an exact science and it’s possible you’ll make some mistakes along the way. Some of the most common mistakes are just not doing the basics — like saving early and often, getting your company matching contribution, paying down debt, and so on. But even if you do make a few mistakes, you can still get your retirement plan back on track.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Help build your nest egg with a SoFi IRA.

FAQ

Why is it important to start saving early?

Getting an early start on retirement saving means you generally have more time to capitalize on compounding returns. The later you start saving, the harder you might have to work to play catch up in order to reach your goals.

What is the first thing to do when you retire?

The first thing to do when you retire is review your budget and financial plan. Consider looking at how much you have saved and how much you plan to spend to make sure that your retirement is off to a solid financial start.

About the author

Rebecca Lake

Rebecca Lake

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


Photo credit: iStock/Morsa Images


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

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

SoFi Invest®

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

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


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

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

SOIN-Q224-1905222-V1

Read more
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2025 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender