invest Archives | Page 39 of 181

Jan

2025

S&P 500 Companies Helping Clean the Oceans

By Laurel Tincher | invest, Investing | Comments Off

Spurred by concerns about the growth of ocean pollution worldwide, a few S&P 500 companies — among the largest U.S. companies by market cap — are contributing to ocean cleanup endeavors.

While most people know that the ocean is the world’s largest natural resource, covering nearly 70% of the surface of the earth, few understand what it would mean if “the blue economy” failed to thrive. The oceans not only are a vital food source, these vast bodies of water supply ingredients for pharmaceuticals and biofuel, and help absorb most of the world’s CO2.

Yet right now, pollutants ranging from chemicals to plastics are threatening the viability of oceans on every front.

Recognizing that maintaining healthy oceans is a pressing economic issue, corporate leaders are taking steps to help with ocean cleanup.

Key Points

• Oceans cover nearly 70% of the earth’s surface, and provide many of the world’s natural resources, including food and ingredients for medicine and biofuel.

• Scientific studies show that the buildup of pollutants continue to threaten the health of the seas and much of marine life, putting “the blue economy” at greater risk.

• Ocean pollution includes numerous industrial chemicals, such as byproducts from manufacturing and mining, but plastics comprise most of the debris in the oceans today.

• Corporate leaders recognize the potential long-term impact of not taking action to shore up the health of the world’s largest and most valuable natural resource.

• S&P 500 companies are developing technologies and systems that can help manage pollutants and clean up the oceans.

Why Cleaning the Ocean Is Important

Oceans represent an almost unfathomable source of global wealth, and are essential to life on this planet. They contain some 97% of the world’s water (fresh water is about 3% of the global supply), and comprise 99% of the living space on earth.

Understanding the Blue Economy

The seas and oceans also provide immense economic support to countries around the world, providing well over $1 trillion in revenue. Offshore oil and gas enterprises make up 65% of the ocean-based economy.

Other industries that depend on the oceans include:

• Tourism

• Fishing

• Ship building and maintenance

• Marine equipment

• Ports

• Container shipping

While a growing number of investors are increasingly interested in ESG or sustainable investing opportunities, these strategies are still evolving. Companies that are taking a more direct role in ocean cleanup are also needed.

Impact of Industry on the Oceans

Clearly, if the oceans aren’t healthy, it will have a huge impact on human health and economies as well. Yet the current level of ocean pollution is nothing short of alarming.

• Ocean acidification threatens essential coral reef ecosystems around the world, which is impacting biodiversity as well as natural sources of filtration.

• Overfishing is putting both fish populations and vital food supplies at risk of depletion.

• Oil spills and industrial byproducts have a toxic effect on both human and animal populations globally.

• Fertilizer runoff from industrial farming and agriculture ends up in the oceans.

The biggest source of ocean pollution by far comes from plastic. According to the UNESCO Intergovernmental Oceanographic Commission, plastic from bottles, utensils, fishing equipment (rope, nets), among other sources, make up 80% of the plastic debris found in the ocean today. And some 8 to 10 metric tons of plastic are dumped in the ocean each year.

Fortunately, work is being done to clean up and protect the oceans. Large corporations, startups, nonprofits, and governments are participating in the effort. Some companies are working on preventing ocean pollution and others are working to clean up existing pollution.

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Which S&P 500 Companies Are Helping Clean Up the Ocean?

Cleaning up the oceans requires effort from multiple angles. Consumer education can help reduce the number of products people buy, and encourage individuals to buy more sustainable products. Green investing opportunities can inspire investors to support sustainable companies.

New materials, manufacturing and waste management processes can increase the percentage of products that get recycled or composted rather than ending up in waterways.

Cleanup projects are also needed to remove the waste and emissions that have already made their way into the oceans. Some of the S&P 500 companies participating in these efforts are included below.

Pollution Treatment

Ocean pollution includes chemicals, trash, oil, and other substances. Additionally, the oceans absorb greenhouse gases emitted from human activities, which leads to ocean warming and acidification.

Warming and acidification result in destruction of coral reefs and ocean ecosystems, and both fertilizer runoff and warming also contribute to other problems like invasive seaweed growth and algae blooms.

• Corporations such as Apple, Alphabet, Disney, Microsoft, and Meta are among the top companies selected by Sustainability Magazine for their efforts to reduce their carbon footprint. Helping reduce the amount of the greenhouse gas CO2 in the atmosphere and oceans may help mitigate global warming and acidification of waterways.

• Pollution and water treatment companies that help prevent ocean pollution through their products and services include American Water Works Company, Ecolab, Pentair plc, Xylem, and IDEX Corporation.

Recycling Products

Other ways that S&P 500 companies help clean the oceans are through the development of recycling and waste management programs and the production of goods that are either made from plastic gathered from the ocean or designed to reduce the use of virgin plastic.

The truth about recycling is that many items made from plastic and other materials can’t be recycled. About ¼ of items consumers place in recycling bins can’t be recycled by the recycling facilities they are taken to.

Only about 9% of the world’s plastic gets recycled. The rest ends up in the natural environment, gets incinerated, or goes to landfills where it produces greenhouse gases such as methane.

Some companies are working on improved recycling methods and developing new materials, products, and packaging that can be recycled or are biodegradable.

If consumers don’t have access to local recycling programs, plastic items they use may still end up in the oceans.

Recommended: Green Bonds Explained

Ongoing Obstacles to Ocean Cleanup

Although the improvements and innovations in the area of ocean pollution management are a step in the right direction, they don’t solve the problem of overconsumption. In some cases, companies that appear to embrace sustainability may be employing greenwashing tactics to convince consumers that their products are eco-friendly when they’re not.

Companies are under increasing internal and external pressure to show strong Environmental, Social, Governance (ESG) metrics and improve their overall sustainability, and recycling and waste production are a big part of that effort.

When evaluating a company’s ESG metrics it’s important to do some research to see if they are really making improvements and progress towards goals, or simply putting out exaggerated or false claims.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

Startup Companies to Watch

In addition to S&P 500 companies, many startups are developing technologies to help clean the oceans. These five startups, highlighted by SustainableReview.com, are forming partnerships and selling their services to S&P 500 companies. Some of these include:

• Algenisis. A California-based company that has developed a durable new plastic substitute from algae.

• AquiPor Technologies. This Seattle-based startup has created a sustainable new type of material that prevents water pollution.

• Heliogen. Based in California, this company has developed an AI-powered thermal solution that supports companies in their decarbonization efforts.

• FuelGems. Offering an additive that helps reduce carbon emissions from traditional fuels like gas, oil, and diesel, this Austin, TX-based company relies on nanotechnology.

The Takeaway

When it comes to sustainability, everything is connected. To clean the oceans and prevent further damage to the world’s biggest natural resource, efforts are needed across the entire global supply chain. In addition to investing in individual stocks of companies working to help clean the oceans, investors can also find index funds and ETFs that include several companies, such as those focused on ESG, waste management, materials, or clean oceans.

Ready to start investing for your goals, but want some help? You might want to consider opening an automated investing account with SoFi. With SoFi Invest® automated investing, we provide a short questionnaire to learn about your goals and risk tolerance. Based on your replies, we then suggest a couple of portfolio options with a different mix of ETFs that might suit you.

Open an automated investing account and start investing for your future with as little as $50.

FAQ

What companies dump waste into the ocean?

Although companies may not be directly dumping waste into the ocean, studies have found that the majority of ocean waste is made up of plastic products from companies such as Coca-Cola, PepsiCo, Nestle, Procter & Gamble, and Danone.

Which industry pollutes the ocean most?

In terms of plastic waste, the beverage industry contributes the most to ocean pollution with its plastic bottles that are generally not recycled.

What companies are cleaning up the ocean?

Startups such as The Ocean Cleanup, Seabin project, and Recycling Technologies are working to clean up the ocean.

Photo credit: iStock/Philip Thurston

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.

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.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Jan

2025

The Pros & Cons of Thematic ETFs

By Samuel Becker | Growing Wealth, invest, Investing | Comments Off

Thematic ETFs are a subset of exchange-traded funds that allow investors to make targeted investments on a specific trend or industry. ETF providers have used them to cover a wide range of topics in recent years, allowing investors to use them to gain exposure to themes as wide-ranging as artificial intelligence, renewable energy, gender equality, and even pet care.

But some market observers warn that some thematic ETFs can be too narrow in their focus for some investors’ tastes, while also allowing them to make targeted investments; so, there may be trade-offs. As such, investors who are interested in investing in thematic ETFs would be wise to do their homework before making the leap. Here’s a deeper dive into thematic ETFs and the pros and cons of including them in an investor’s portfolio.

Key Points

• Thematic ETFs target specific trends or industries, offering investors exposure to niche market sectors.

• They can capture societal or technological trends, providing quick access to related companies.

• Thematic ETFs may underperform broader markets and carry higher costs.

• They offer strategic benefits by allowing targeted investments with some diversification.

• Investors should research thematic ETFs thoroughly due to their narrow focus and potential risks.

What’s a Thematic ETF?

ETFs, or exchange-traded funds, are securities that bundle many assets into one product, so when an investor purchases a share of an ETF, it gives them exposure to all the holdings in that fund. They’re similar to mutual funds, but ETFs are listed on an exchange, so they can be bought or sold at any time of the trading day. Thematic ETFs, then, invest in securities that focus on a single theme, concept, or industry.

Over the years, interest in thematic ETFs has increased as more retail investors have entered the stock market and gravitated towards niche sectors that represent technological or societal shifts.

This flexibility is one of the benefits of ETFs, along with the ability to diversify at a low cost. Traditional ETFs tend to be inexpensive and track some of the broadest, well-known benchmarks in the world, like the S&P 500.

In contrast, thematic ETFs tend to group stocks in a much more targeted way, grouping similar companies together, for example, to give investors exposure to a more narrow subset of the overall market.

Types of Thematic ETFs

There are myriad types of thematic ETFs, and in most cases, there’s likely a thematic ETF on the market that matches an investor’s interest or investment strategy, no matter how niche. But if you wanted to try and narrow things down and silo thematic ETFs at least to some degree, you could classify the different types of thematic ETFs as those focused on technology and innovation, urbanization, environmentally-focused, next-generation economies, or those focused on demographic shifts. Within those main categories, there would be dozens of sub-categories and further down, even more specific themes.

Why Invest in Thematic ETFs?

Thematic ETFs allow an investor to gain exposure to emerging technologies, like cloud computing, electric vehicles, artificial intelligence, blockchain tech, or even robotics. It’s perhaps the wide range of options that makes thematic ETFs attractive to some investors.

But the basic vehicle of an ETF can also have some big advantages for investors. That is, ETFs have a built-in degree of diversification, which can help many investors get an out-of-the-box element of risk mitigation in their portfolios — though it’s important to understand the risk of these investments, as well. It’s important to note that diversification may be limited, however, as ETFs often hold securities from the same sector, which have the same focus, etc. So, depending on the ETF, the level of diversification may vary.

Further, ETFs are also relatively easy to trade, and can be purchased or sold on the stock market similar to shares of a company.

Strategic Benefits

On a more granular level, there may be some strategic benefits for investors to investing in thematic ETFs. In short, thematic ETFs can allow investors to make relatively targeted investments in specific areas of interest (again, such as particular industries) while also benefiting from a degree of diversification within those areas of interest. In other words, an investor interested in investing in aerospace may buy shares of aerospace companies to scratch their itch – or, they can buy shares of aerospace-focused ETFs, which should help diversify their holdings within the aerospace industry.

While there are some strategic benefits to investing in thematic ETFs, there are still some broader pros and cons to thematic ETFs for investors to consider.

Pros of Investing In Thematic ETFs

There can be benefits to investing in thematic ETFs, as well as potential downsides. Here are some of the potential pros:

• Buying a thematic ETF can make it convenient to invest in a specific sector or trend an investor is interested in. For instance, instead of buying a number of companies in a niche space that appears to be growing, an investor can simply buy an ETF.

• Thematic ETFs can capture interesting societal or technological trends, giving investors quick access to a group of companies representing such changes.

Cons of Investing In Thematic ETFs

There can also be downsides of thematic ETFs too:

• Thematic ETFs may be narrow in their focus and have fewer assets. And many may be relatively new to the market, meaning they don’t have much of a track record. This makes it more likely that they could close as well.

• Part of the reason many of these thematic ETFs may end up performing poorly is because sometimes by the time the ETF hits the market, the theme has already experienced its 15 minutes of fame. In other words: a fad has faded away.

• There’s evidence that thematic ETFs tend to underperform the broader market.

• Costs for thematic ETFs may also be higher, so investors might pay higher fees.

Are Thematic ETFs a Long-Term Investment?

It’s difficult to say if thematic ETFs are designed specifically for long-term investing. In fact, thematic ETFs may be used as a part of a long-term investment strategy, but it’ll ultimately depend on the specific fund an investor is looking at, their portfolio needs, their goals, and what they’re hoping to see in terms of returns over a prolonged period of time. It’s always important to keep the risks specific to thematic ETFs in mind, however, before making any sort of investment – long, or short-term.

How to Choose a Thematic ETF

It can be very helpful to users to read the ETF prospectuses to make sure they understand the products they are putting money into. Investors can also do more research into the specific companies the ETF is invested in.

Timely themes, which might tap into current market movements, often start out strong but may drop off (and fast). Frequently, the ETF that lands on the market first can have a big first-mover advantage — and end up being the go-to ETF for that theme.

Investors often consider the costs of the fund and what kinds of returns it’s had. Past performance is not necessarily a good predictor of future returns, but it may still provide a sense of its volatility.

Thematic Investing Trends to Watch in 2025

It can be difficult to nail down which specific trends investors may want to keep an eye on at any given time, since trends do, by definition, come and go. But if there were a few areas of interest that may be worth keeping an eye on in the years ahead, it may be technology related to artificial intelligence, precious metals such as copper, and ESG=related investments, such as development of renewable and clean energy.

The Takeaway

Thematic ETFs move away from the original tenets of index investing, which focused on providing very broad exposure to an asset class or sector. Instead, thematic funds instead allow investors to wager on niche, trendy market sectors. They’ve been popular because they allow for very targeted wagers on technological or societal trends people see around them.

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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

Are thematic ETFs worth it?

Thematic ETFs may be worth it to certain investors who are looking to make more targeted ETF investments in specific industries or themes. Ultimately, it all comes down to the preferences and goals of the individual investor.

What types of sectors do thematic ETFs typically focus on?

There may not be a theme, sector, or industry that thematic ETFs “typically” focus on, as there are a diverse number of themes that each ETF can focus on. In that sense, there isn’t really a “typical” thematic ETF.

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.

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

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Jan

2025

How Much House Can You Afford When Paying Off Student Loans?

By Janet Siroto | Fresh Out of School, Home Ownership, invest, Student Loans, student_loan | No Comments

If you’re like many Americans, you may have student loans, and you may also hope to own your home at some point. You may worry that carrying student debt and buying your own place are mutually exclusive, but that’s not necessarily the case.

Yes, it can be true those with higher student loan balances may be less likely to be homeowners than peers with lower amounts of debt. However, understanding your debt-to-income ratio and other aspects of your financial profile can be vital. This insight can both inform how much room there is in your budget for a home loan payment and highlight how to improve your odds of being approved for a mortgage.

With this guide, you’ll learn the ropes, such as:

• Understanding how mortgage lenders evaluate your finances

• How your student loans impact your profile

• Steps you can take that may boost your chances of getting a home loan application approved when you have student debt.

Getting a Mortgage When You Have Student Loans

Student loans are a familiar financial burden. Currently, Americans hold in excess of $1.7 trillion in student loan debt. A significant 70% of undergraduates finish school with an average sum of $37,000 or more in student loans.

You may wonder how having student loans can impact your eligibility for a mortgage. Here’s what you should know: When a lender is considering offering you a home loan, they want to feel confident that you will pay them back on time. A key factor is whether they think you can afford the mortgage payment with everything else on your plate. To assess this, a lender will consider your debt-to-income (or DTI) ratio, or how high your total monthly debt payments are relative to your income.

For the debt component, the institution will look at all your liabilities. These can include:

• Car loans

• Credit card payments

• Student loans.

In the case of student loans (other than those forgiven by Biden administration), banks know that you’re likely to be responsible for that debt. It usually can’t be discharged in a bankruptcy and it’s not secured to an asset that a lender can recover.

Many industry professionals say that your debt-to-income ratio should ideally be below 36%, with 43% the maximum. If you have a high student loan payment or a relatively low income, that can affect your debt-to-income ratio and your chances of qualifying for a mortgage.

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Can You Get a Mortgage With Student Loan Debts?

Are you wondering, “How much house can I afford with student loans?” Here are some important facts. Having student loan debt doesn’t disqualify you from getting a mortgage, but it can make it harder. So here’s how student loans are calculated for a mortgage: That student loan debt will increase your DTI ratio, which can make it harder to qualify for funds from lenders.

For example, here’s a hypothetical situation: Say you earn an annual salary of $60,000, making your gross monthly income $5,000. Say you owe $650 per month on a car loan and have a credit card balance with a $500 monthly minimum payment.

And let’s say you have student loans with a minimum payment of $650 a month. All your debt payments add up to $1,800 a month. So your debt-to-income ratio is $1,800/$5,000 = 0.36, or 36%. That’s right at the limit that some conventional lenders allow. So you can see how having a high student loan payment can affect your ability to qualify for a mortgage.

Another way that student loans can affect your chances of buying a home is if you have a history of missed payments. If you don’t make your minimum student loan payments each month, that gets recorded in your credit history.

When you fail to make payments consistently, your loans can become delinquent or go into default. Skipping payments is a red flag to your potential mortgage lender: Since you haven’t met your obligations on other loans in the past, they may fear you’re at risk of failing to pay a new one as well.

That said, if you have an acceptable DTI ratio and a history of on-time payments on your student loans, you likely have a good shot at being approved for a mortgage. It’s not a matter of having to make a choice between paying off student loans or buying a house.

Estimate How Much House You Can Afford

Taking into account the debt-to-income ratio you just learned about, use this home affordability calculator to get a general idea of how much you can afford. This tool is one you can use to help estimate the cost of purchasing a home and the monthly payment.

How Student Loan Debt Affects Your DTI Ratio

As mentioned above, student loan debt can increase your DTI ratio. How much it will increase your DTI number will depend on how big your loan debt is. Currently, the average federal student loan debt is $37,338 per borrower. The figure for private student loan debt is $54,921.

Obviously, to get that average figure, many different amounts are factored in. Consider these two scenarios:

• Person A earns $120,000 and has $80,000 in student loan debt, plus a car payment, plus $15,00 in credit card debt.

• Person B earns $80,000, and has $10,000 in student loan debt, no car payment, and $3,000 in credit card debt.

It’s likely that Person B will have an easier time qualifying for a home loan than Person A. It boils down to one having a higher DTI ratio.

Recommended: Strategies to Pay Off Student Debt

Improving Your Chances of Qualifying for a Mortgage

Are you wondering how to buy a house with student debt? Your student loan debt is just one part of the picture when you go shopping for a home loan. Lenders look at many other aspects of your financial situation to assess your trustworthiness as a borrower. By focusing on improving these factors, you may be able to increase your chances of getting a mortgage.

• Credit score: One of the most important things to address is your credit score, since this is a key measure lenders use to evaluate how risky it would be to lend to you. Your credit score is determined by many factors, including whether you’ve missed payments on bills in the past, how much debt you have relative to your credit limits, the length of your credit history, and whether you’ve declared bankruptcy.

If your credit score is below 650 or 700, you may want to work on building it. Starting by consistently making your payments on time, paying off debt, or responsibly opening a new credit line may help.

• Automate your payments. If keeping up with payments has been challenging in the past, setting up automatic payments to your credit card. You might also establish automatic payments to, say, your utilities through your providers or your bank to help you stay on track without having to memorize due dates. In the case of a bankruptcy, you’ll typically have to wait 10 years for it to disappear from your record.

• Strengthen your work history. Your employment matters to a lender because, if you’re at risk of losing your job, your ability to pay back the loan could change as well. Gaps in employment, frequent job changes, or lack of work experience can all be red flags for a financial institution.

If employment history is a weakness in your application, perhaps you can focus on finding a more stable role than you’ve had in the past as you are saving for a house. This could also be a matter of waiting until you’ve been in a new job for a couple of years before applying for a mortgage.

• Save up for a bigger down payment. Another way to improve your prospects is to save more money for your down payment. If you have enough to put at least 20% down on a home, your student loans may become less of a factor for the lender.

You can save for a down payment by putting funds in an interest-bearing savings account or CD, asking wedding guests (if you’re getting hitched) to contribute to a “house fund,” earning more income, or even asking a family member for a gift or loan.

• Focus on your DTI ratio. Another key area you could focus on is your debt-to-income ratio. Tackling some of your debts — whether student loans, credit card balances, or a car loan — could help lower that ratio. Another strategy is to increase your income, perhaps by asking for a raise, getting a new job, or taking on a side hustle. This can help you pay down debt and improve your DTI ratio.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

How Student Loan Refinancing May Help

If you’re buying a home with student loans, another way to potentially improve your debt-to-income ratio is to look into student loan refinancing. When you refinance your student loans with a private lender, you replace your existing loans — whether federal, private, or a mix of the two — with a new one that comes with fresh terms.

Refinancing can help borrowers obtain a lower interest rate than they previously had, which may translate to meaningful savings over the life of the loan. You may also be able to lower your monthly payments through refinancing, which can reduce your debt-to-income ratio.

Refinancing isn’t for everyone, since you can lose benefits associated with federal loans, such as access to deferment, forbearance, loan forgiveness, and income-based repayment plans.

But for many borrowers, especially those with a solid credit and employment history, it can be an effective way to reduce debt more quickly and improve the chances of getting a mortgage.

💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

Don’t Let Student Loans Hold You Back

With many Americans holding student loan debt, it’s understandable that this financial burden could pose a hurdle for some would-be homeowners. But can you get a mortgage with student loans? Yes, student loans and a mortgage aren’t mutually exclusive. Paying for your education doesn’t have to cost you your dream of owning a home.

If you’ve been making payments on time and your debt is manageable relative to your income, your loans might not be an issue at all. If your student loans do become a factor, you can take steps to get them under control, potentially improving your chances of qualifying for a mortgage. One option could be refinancing those loans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Can I refinance student loans to improve my mortgage eligibility?

Refinancing student loans might improve your mortgage eligibility. If you obtain a lower rate, you could potentially pay down your student loans more quickly, which could lower your debt-to-income (DTI) ratio. However, refinancing federal loans can mean you are no longer eligible for loan forgiveness and other programs.

Can a cosigner help if I have student loans and want to buy a house?

Having a cosigner on your student loans could help with your mortgage qualification if you are “on the bubble” in terms of qualifying. A cosigner with a strong financial profile and credit history could help tip you into the approval zone.

Will a history of on-time student loan payments positively impact my mortgage application?

A history of on-time loan payments is an asset. It can help build your credit score, which is one of the factors lenders use to assess whether to approve your mortgage application.

SoFi Student Loan Refinance
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Jan

2025

Brokerage Accounts 101: Types & Benefits Explained

By Samuel Becker | Growing Wealth, invest, Investing | No Comments

Brokerage accounts offer a way into the financial markets: think stocks, bonds, and other securities. Your account enables you to buy, sell, and trade these products. Not all brokerages operate the same way; nor do they all offer the same types of investments. We’ll break down what brokerage accounts are, the different account types available, and how they differ from other financial accounts.

Key Points

• Brokerage accounts allow individuals to buy and sell securities.

• Cash brokerage accounts allow trading securities using only deposited cash.

• Margin accounts offer the ability to borrow for trading, increasing both leverage and risk.

• Joint accounts are typically used by partners or family members for shared investments.

• Discretionary accounts enable brokers to make investment decisions on behalf of the holder.

What Is a Brokerage Account?

A brokerage account is a type of investing tool offered by investment firms. These accounts allow people to invest their money by buying and selling stocks, bonds, exchange-traded funds (ETFs), and other types of securities.

These accounts are typically flexible and come in various forms, catering to different needs and experience levels. For prospective investors, knowing what a brokerage account is and how they work is important. For seasoned investors, learning even more about them can help deepen their knowledge, too.

What Is a Brokerage Account Used For?

Brokerage accounts open up the world of online investing or investing through a broker in stocks and allows investors to conduct other transactions, such as options trading. They are offered by different types of financial firms as well. Here’s a breakdown of different brokerage accounts, and what each might be used for:

• Full-service brokerage firms usually provide a variety of financial services, including allowing you to trade securities. Full-service firms will sometimes provide financial insights and automated investing to customers.

• Discount brokerage firms don’t usually provide additional financial consulting or planning services. Thanks to their pared-down services, a discount brokerage firm often offers lower fees than a full-service firm.

• Online brokerage firms provide brokerage accounts via the internet, although some also have brick and mortar locations. Online brokers often offer some of the lowest fees and give investors freedom to trade online with ease. They also tend to make information and research available to consumers.

You can start the application either online or in-person. You can then fund your account by transferring money from a checking or savings account.

Some brokerage firms require investors to use cash to open their accounts, and to ensure they have sufficient funding to cover the cost of their investments (as well as any commission fees). Some do not require an initial deposit, however.

Brokerage accounts generally do not have restrictions on deposit or withdrawals. This makes them different from retirement accounts, which typically have more transaction limits or restrictions. Investors do need to claim any profits that they withdraw from their account as taxable income.

Here’s a closer look at how brokerage firm accounts differ from other types of money accounts.

💡 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.

Brokerage Accounts vs Checking Accounts

Brokerage accounts and checking accounts have one key similarity: both can hold cash. Brokerage accounts will often “sweep” your cash holdings into a money market fund that’s managed by that same brokerage, so that it may potentially earn interest.

Brokerage accounts are different from checking and savings accounts because of how your money is protected. Most checking accounts offered by a bank will come with Federal Deposit Insurance Corporation (FDIC) protection. FDIC insurance protects the first $250,000 per depositor, per bank, per account type.

For example, if you have a checking and a savings account at the same insured bank, the combined balances are covered up to $250,000. If you hold accounts that fall under different ownership categories (e.g., a joint checking account), those accounts may be covered separately, and be insured up to its own $250,000 total.

Brokerage accounts, on the other hand, are often protected by Securities Investors Protection Corporation (SIPC) insurance. The SIPC safeguards customers against losses caused by brokers becoming insolvent. They ensure the return of cash and securities, up to $500,000 (including $250,000 for cash). They do not cover losses due to market fluctuations or investment decisions, however.

Benefits of Having a Brokerage Account

The biggest benefit of a brokerage account is the opportunity to invest. Although a money market account could accrue interest, its funds are designed to be invested rather than held. These accounts come with other advantages as well.

• Flexibility and control: Brokerage accounts allow owners to trade financial securities and invest their money as they see fit.

• Potential for returns: You may be able to realize gains that are greater than current interest rates. However, they also run the risk of unlimited loss depending on how their investments perform.

• No contribution limits: You are only limited by the amount of money you want (or have) to invest. Beginners should seriously consider how much they are willing to lose before funding their account and trading securities.

• Liquidity: Brokerage accounts offer full liquidity, enabling you to withdraw and deposit as you please.

Top 3 Types of Brokerage Accounts Explained

There are several types of brokerage accounts: cash brokerage accounts, margin accounts, and discretionary accounts.

1. Cash Brokerage Accounts

Cash brokerage accounts are a straightforward option for investors who want to trade securities without using borrowed funds, or leverage, as you would with a margin account. These accounts only let you invest with the cash you deposit, which can be a simpler approach to investing.

Features:

• Simple account structure: Cash brokerage accounts are fairly simple in that investors can trade with whatever they deposit.

• Trading ability: Investors have the ability to trade a wide variety of assets, including stocks, bonds, ETFs, and mutual funds.

Pros and Cons:

Brokerage accounts are simple, offer flexibility, and often do not have maintenance fees. They do not offer leverage, which can affect your trading strategies. They may be best for investors seeking simplicity.

2. Margin Brokerage Accounts

Margin brokerage accounts let you use margin when trading. You can effectively borrow money to trade with directly from the brokerage. Thus, you may require approval from a brokerage to open an account. There’s a higher degree of risk with these accounts than cash brokerage accounts, given that you are borrowing money to invest with. There is a significant risk of loss as well as gain.

Features:

• Leverage: The ability to borrow funds to increase buying power, allowing you to trade more than your initial balance. Margin comes with interest, however, which can erode potential profits.

• Risk management tools: Some margin accounts offer features like stop-loss orders or margin alerts to help manage risks.

• Flexibility: Allows for short selling, providing opportunities to profit from declining markets.

Pros and Cons:

Margin accounts increase purchasing power, allowing investors to make larger trades, potentially leading to higher returns and the opportunity to profit from short selling. However, these benefits come with increased risk, as losses can be amplified, interest costs add up, and margin alerts may require investors to deposit additional funds or sell assets, making careful management essential.

3. Prime Brokerage Accounts

Prime brokerage accounts are designed mostly for institutional investors and high-net-worth individuals. These accounts offer advanced services (e.g., margin trading, securities lending) and proprietary research. These are sophisticated tools designed for experienced traders.

Features:

• Access to leverage: Prime brokers allow clients to borrow funds for margin trading, enabling higher potential returns (but also increased risk).

• Customized services: Tailored to meet the needs of sophisticated clients, including advanced trading strategies and risk management.

• Securities lending: Clients can borrow securities to execute short sales, enhancing their trading flexibility.

• Clearing and settlement services: Prime brokers handle the logistics of trades, including clearing and settlement, often allowing clients to access a broader range of financial instruments.

• Research and reporting: Advanced market research, real-time data feeds, and detailed reporting on positions and trades.

Pros and Cons:

Prime brokers offer access to leverage, allowing clients to borrow funds for margin trading and enhance potential returns, while also providing tailored services for institutional investors or high-net-worth individuals. However, these advantages come with increased risk, as borrowing funds for margin trading amplifies potential losses.

Other Types of Brokerage Accounts

In addition to cash, margin, and joint brokerage accounts, there are other account types that serve specific needs and investment strategies. These accounts cater to different financial goals, investor preferences, and tax implications. Some common alternatives include:

• Custodial Accounts: These accounts are set up by an adult for the benefit of a minor, with the custodian managing the assets until the minor reaches the age of majority.

• Managed Accounts: In these accounts, a professional portfolio manager makes investment decisions on behalf of the account holder, often for a higher fee.

Each of these account types has unique benefits, tax treatments, and management structures designed to meet specific financial objectives. Depending on your investment goals, it may be advantageous to explore these alternatives to maximize returns and minimize tax liabilities.

How to Choose the Right Brokerage Account for You

Choosing the right brokerage account depends on your investment goals and risk tolerance. For those looking to amplify their investments, a margin account offers leverage, though with added risk. Joint accounts are ideal for shared investments, while more experienced investors may opt for managed or discretionary accounts for professional guidance. Your decision should align with your financial objectives, time horizon, and comfort with risk.

The Takeaway

Brokerage accounts allow owners to buy and sell investments and financial securities. They are offered by a number of financial institutions, and come in a few different types. By and large, though, they’re a very popular choice for investors looking to get their money in the markets.

They do have their pros and cons and associated risks, however. It may be beneficial to speak with a financial professional to learn more about how you can use a brokerage account to your advantage in pursuit of your financial goals.

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 minimum needed to open a brokerage account?

Different brokerage firms will have different rules regarding minimum deposits, but there are many that don’t require a minimum deposit. Again, it’ll depend on the specific firm.

Can I withdraw money from a brokerage account?

You can withdraw money from a brokerage account by transferring funds to a linked bank account, or by requesting a check or wire transfer. Keep in mind that any profits may be subject to capital gains tax, which may vary depending on how long you’ve held the assets among other factors.

Do you pay taxes on brokerage accounts?

The capital gains, dividends, and interest income earned in the account are all taxable, with long-term capital gains benefiting from lower tax rates compared to short-term gains. The specific tax rate depends on factors, such as how long you hold an asset and your overall income, so it’s best to consult with a tax professional for guidance.

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Jan

2025

Green Bonds: What They Are and How to Invest in Them

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

Green bonds are debt instruments used to raise money for new and existing environmental and sustainability projects while providing investors with regular returns, similar to ordinary bonds. Green bonds may help fund climate change mitigation and adaptation, renewable energy, conservation, waste management, transportation, and more.

To qualify as actual green bonds, these investments have to be certified by a third party, like the Climate Bonds Standard and Certification Scheme. Further, green bonds may offer investors certain tax benefits versus other kinds of bonds.

Key Points

• Green bonds are debt instruments funding environmental and sustainability projects, offering regular returns.

• Benefits include value alignment, regular returns, potential tax benefits, and enhanced transparency.

• Exposure to green bonds can be gained through mutual funds, ETFs, or direct purchases.

• Third-party certifications ensure funds are used for legitimate environmental projects, maintaining investor confidence.

• Tax incentives for green bond investors may include exemptions and credits on interest income.

What Is a Green Bond?

A green bond is a type of fixed-income security that pension funds or institutional investors can buy. Individual investors can add green bonds to their portfolio by purchasing ETFs or mutual funds that include green bonds. They are issued by corporations, governments, and financial institutions to raise money for specific sustainability and environmental projects. The World Bank is one of the largest green bond issuers.

A green bond is similar to other types of bonds, but the money borrowed through their sale goes towards vetted projects that fit into pre-determined frameworks to meet sustainability standards.

Most green bonds are asset-linked bonds or “use of proceeds” bonds, where the money raised from the sale of the bonds is earmarked for green projects and backed by the issuer’s balance sheet. For example, “use of proceeds” revenue bonds use the issuer’s revenue as collateral; green project bonds rely on the assets and balance sheet of the particular project as collateral; and green securitized bonds where a group of projects are collateral.

How Do Green Bonds Work?

Green bonds work much the same as other types of bonds. They’re issued by an entity and pay a certain interest rate, with the main difference being that institutional investors are usually buying the bonds, not retail investors.

Who Issues Green Bonds?

When a business, government, or financial institution wants to raise money for a sustainability project, they might choose to issue green bonds, which can be purchased by individual or institutional investors. Generally green bond issuers are large municipalities or public corporations, because a strong credit rating provides the issuer with a better borrowing rate.

The difference between investing in a green bond and buying a traditional bond is the issuer publicly discloses their plans for how the money will be spent. Uses of the money must be considered ‘green’ for it to be marketed as a green bond. The issuer generally releases a pre-issuance report describing the projects the funds will be used for and their expected impact.

Green Bond Principles

In 2014, a group of investment banks established four “Green Bond Principles” to help investors understand green bonds. The principles are:

1. Use of Proceeds: How money is spent and what types of projects are included

2. Process for Project Evaluation and Selection: How projects are chosen and vetted

3. Management of Proceeds: How the money raised by the bond is managed

4. Reporting: How project progress and impact is shared

Certifying Green Bonds

Issuers don’t have to follow specific requirements to call their bond green, but many follow voluntary frameworks such as the Climate Bonds Standard (CBS) or the Green Bond Principals (BGPs). By following those frameworks the bond will have a higher rating and investors will be more likely to buy it.

The guidelines outline the types of projects funds are recommended to be used for, how to select green projects, and how to report on the use of funds and results of the bond issuance. Third-party firms work with the issuer as underwriters, certifiers, and auditors to ensure the money is going towards quality projects and used in the ways the borrower claimed it would be.

Examples of Green Bonds

There are many green bonds on the market. Here are some examples:

• Goldman Sachs Renewable Power: In 2020, Goldman Sachs issued a 24-year, $500 million bond, certified by Sustainalytics, to use for solar energy projects.

• PNC Financial Services Group: In 2019, PNC Bank issued its inaugural green bond, and issued another in 2023. The first was a 5-year, $650 million bond, using an internal green bond framework, to use for energy projects.

• Verizon Communications Inc.” Also in 2019, Verizon Communications issued a 10-year, $1 billion bond to use for energy generation and storage, buildings, and land use projects.

Why Invest In Green Bonds?

Investing in green bonds can be a good way for investors to put their money where their values are. Like other kinds of sustainable investing, ESG investing, or impact investing, green bonds may be a way to both generate returns and to try and make a positive difference in the world. While individuals can’t usually purchase green bonds directly, they can add them to their portfolio by purchasing certain ETFs and mutual funds.

Interest in sustainability, ESG, renewable energy, and climate change has increased in recent years and could keep growing. As investor interest grows, more and more green bonds are being made available with better disclosure and transparency to give investors peace of mind about the quality of the asset.

For many investors, the main draw of green bonds is they are designed to help support sustainability projects (companies, new technologies) that support people and ecosystems around the world.

Another potential benefit of investing in green bonds is they can come with tax exemptions and tax credits, so investors might not have to pay income tax on the interest earned from the bond.

How to Buy Green Bonds

Many investors may be able to invest in green bonds directly from issuers. For instance, if a company or government organization is offering green bonds directly to investors, you may be able to do so.

Further, there are funds that offer investors exposure to green bonds. You can search out ETFs or mutual funds, for instance, that track or invest in green bonds. It may also be possible to invest in green bonds directly through a brokerage, but there may be stipulations, such as additional fees or commissions.

Green Bonds vs Climate Bonds vs Blue Bonds

Green bonds can be structured in different ways and generally fall into the category of impact investing.

• For example, the term green bond can cover a broad spectrum of projects, from renewable energy to waste management to climate change.

• There are also climate bonds that put money specifically towards climate change projects such as reducing emissions or adapting infrastructure to changing climate conditions.

• Blue bonds specifically fund water-related projects, such as cleaning up plastic from the oceans, marine ecosystem restoration and conservation, sustainable fisheries, and wastewater treatment projects.

The Takeaway

Green bonds are an increasingly popular type of investment product that aim to help make the world a more sustainable place. When a company, government, or financial institution wants to raise money for a sustainability project, they might choose to issue green bonds.

Though green bonds work similarly to other types of bonds, in that they’re a form of debt issued by an entity and pay a certain interest rate, the main difference is that institutional investors typically purchase the bonds, not retail investors. Generally, green bond issuers are large municipalities or public corporations, because a strong credit rating provides the issuer with a better borrowing rate.

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

Can individuals buy green bonds?

Individual investors may be able to buy green bonds directly from issuers, or through their brokerage under certain circumstances. They may also gain exposure through mutual funds or ETFs.

How do investors make money from green bonds?

Like other types of bonds, green bonds pay investors interest payments which can generate returns. Further, investors may be able to take advantage of any applicable tax incentives.

Are green bonds a good investment?

Green bonds may be a good investment if they align with your overall investment strategy and personal investment goals.

Photo credit: iStock/PeopleImages

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S&P 500 Companies Helping Clean the Oceans

Why Cleaning the Ocean Is Important

Understanding the Blue Economy

Impact of Industry on the Oceans

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Which S&P 500 Companies Are Helping Clean Up the Ocean?

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The Takeaway

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Which industry pollutes the ocean most?

What companies are cleaning up the ocean?

The Pros & Cons of Thematic ETFs

What’s a Thematic ETF?

Types of Thematic ETFs

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Strategic Benefits

Pros of Investing In Thematic ETFs

Cons of Investing In Thematic ETFs

Are Thematic ETFs a Long-Term Investment?

How to Choose a Thematic ETF

Thematic Investing Trends to Watch in 2025

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Estimate How Much House You Can Afford

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Don’t Let Student Loans Hold You Back

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Can a cosigner help if I have student loans and want to buy a house?

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Brokerage Accounts 101: Types & Benefits Explained

What Is a Brokerage Account?

What Is a Brokerage Account Used For?

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Brokerage Accounts vs Checking Accounts

Benefits of Having a Brokerage Account

Top 3 Types of Brokerage Accounts Explained

1. Cash Brokerage Accounts

Features:

Pros and Cons:

2. Margin Brokerage Accounts

Features:

Pros and Cons:

3. Prime Brokerage Accounts

Features:

Pros and Cons:

Other Types of Brokerage Accounts

How to Choose the Right Brokerage Account for You

The Takeaway

FAQ

What is the minimum needed to open a brokerage account?

Can I withdraw money from a brokerage account?

Do you pay taxes on brokerage accounts?

Green Bonds: What They Are and How to Invest in Them

What Is a Green Bond?

How Do Green Bonds Work?

Who Issues Green Bonds?

Green Bond Principles

Certifying Green Bonds

Get up to $1,000 in stock when you fund a new Active Invest account.*

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

Examples of Green Bonds

Why Invest In Green Bonds?

How to Buy Green Bonds

Green Bonds vs Climate Bonds vs Blue Bonds

The Takeaway

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prequalify for a SoFi mortgage loan,
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