invest Archives | Page 80 of 180

Dec

2023

The Savvy Investor’s Guide: Top 10 Ways to Aim to Build Your $1,000

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

If you’re looking for ways to invest $1,000, particularly in 2024, there are numerous options available to you, including stocks, bonds, treasuries, and even your own skill set. While investing has always been crucial to growing wealth, these days, it’s probably more important than ever as prices rise and many people struggle to sock enough money away to reach their financial goals.

Fortunately, there is an array of options available to investors, as mentioned, who are looking for ways to invest $1,000 — or any other amount.

1. Dive Into the Stock Market With Index Funds

Investors may want to dip their toes into the stock market and invest in index funds. Investing in index funds comprises a passive investing strategy, which can be less risky than buying individual stocks or securities. These types of funds track or follow a market index, or benchmarket, and track it so as to mimic the performance of the larger market, or a segment of it.

Why S&P 500 Index Funds Make Sense

If you’re looking at investing $1,000, it may make sense to check out S&P 500 index funds, which track the S&P 500 index — more or less, most of the stock market. These index funds give investors exposure to 500 of the biggest stocks on the market.

Notably, investing in one of these index funds can be advantageous because it’s easy, gives investors immediate and broad exposure in the markets, and offers a degree of built-in diversification into their portfolios. That’s not to say that investing in S&P 500 index funds is foolproof, of course, as they do have their risks. In the event of a broad market downturn, for instance, your portfolio would likely take a significant hit, depending on the specific makeup of the portfolio.

As such, index fund investing has some advantages, such as ease of management, relatively low entry costs in some cases, and the ability to quickly diversify a portfolio. But there can be disadvantages, too: Index funds don’t necessarily directly follow indexes, it’s a form of passive investing (which may be disappointing to investors who want a more active approach), and depending on your overall strategy, they may not be the best fit – they may be better for long-term investors, for instance.

The Long-Term Benefits of Market Matching

The true magic of broad index funds is that many of them will track the larger performance of the market over time. Which, if you’ve looked at the historical run of the market, tends to go up. As for the S&P 500, specifically? It has grown significantly over time — but not without some hiccups along the way. The S&P 500 has annualized approximately 10% over time.

2. Embrace Diversification With ETFs

Exchange-traded funds, or ETFs, are another good option for investors looking at how to invest $1,000. They can also serve as an alternative to index funds, as ETFs can be a great tool for some new and experienced investors to gain broad exposure to a wide variety of different asset classes. These days, there are ETFs for almost anything.

How ETFs Offer Accessibility to Beginners

Purchasing shares of an ETF works just like purchasing shares of an individual company’s stock. Which means it can be easy for beginners.

ETF trading, like other types of trading or investing, has its pros and cons, though. As for the pros, ETFs can be easy to trade (again, good for beginners), offer a degree of built-in diversification, tend to have lower associated costs, and may be more tax-efficient than other investment types, like mutual funds. As for cons, ETFs may lack personalization, suffer from tracking errors, introduce counterparty and market risks, and may incorporate complex trading strategies (like leveraged or inverse ETFs).

So, keep in mind that while ETFs may be beginner-friendly, there are advantages and disadvantages.

Comparing Popular ETF Options

As mentioned, investors can look at broad index-focused ETFs, or any number of others. An internet search will yield many options, no matter an investor’s interest.

Imagine an investor who wants exposure to gold mining stocks. But researching all of the many different mining companies out there, examining their plans, management, profitability and more all seems overwhelming. What could such an investor do? They may want to consider buying shares of any number of different ETFs that include a basket of gold mining stocks. There are ETFs for real estate, oil, bonds, and stocks of different companies in many different industries.

💡 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.

3. Bet on Yourself: Invest in Personal Development

If you’re wondering how to invest $1,000 outside of traditional financial securities, look inward! An investment in yourself and your own personal development can also pay dividends.

Education as an Investment

Earning a degree, certificate, or otherwise investing in education is, for many people, a first step toward a brighter financial future. While there are risks and significant costs associated with going to college or earning a degree, it may increase your earning potential significantly, and over the years, that should add up in a big way.

If this is something you’re seriously considering, you could also compare the pros and cons of attending a community college versus a four-year institution, and look at programs that tend to lead to more career opportunities. But remember that there’s no guarantee that a degree or certificate will lead to future job opportunities, or additional earnings.

4. Secure Your Future With Retirement Funds

Another way to invest $1,000 is to sock it away in a retirement account or retirement fund, and there are several options available to investors. For instance, you could open an IRA, or enroll in an employer-sponsored account, like a 401(k).

The Advantage of IRAs

Individual retirement accounts, or IRAs, come in different varieties, such as traditional and Roth IRAs. It’s worth checking out the differences to see which may be the best fit for you and your specific situation or goals, but the general idea is that you can invest money in these accounts, and they’re tax-advantaged. Plus, anyone can open one — they’re not employer-sponsored.

The Magic of 401(k) Matches

Maximizing a 401(k) retirement plan can be another option for investors who are looking to grow their money. Some employers will match employee contributions to 401(k) accounts, effectively supercharging their ability to save. While there are annual contribution limits, investors who have a little extra money to invest may want to see if they can or should put it in their 401(k).

While both IRAs and 401(k)s have some advantages for investors, you’ll want to keep the potential downsides in mind, too. Depending on the type of account you open (Roth versus traditional, for instance), there may not be any immediate tax benefits, for one. Further, it may be difficult to withdraw money quickly if you need it, and there are fees and penalties for doing so depending on your age. You may also be required to take distributions at one point, which some investors may not want to do.

5. Step Into Tech With Robo-Advisors

Robo-advisors are algorithms that pick investments for investors automatically. That may be of interest to some investors looking to put some extra money to work. And letting technology take the reins when it comes to making investment decisions can be appealing to many investors, as it takes much of the guesswork, calculation, and research out of the investing process.

Simplifying Investments With Technology

As for how they work? Generally, an online robo-advisor will ask the investor some simple questions about their investment goals, risk tolerance, and where they are in their wealth-building journey (basically, current age and desired retirement age). Then, based on those answers, a portfolio will be generated, and the amount of money the investor would like to invest will be allocated accordingly.

There are typically several different model portfolios that will be recommended to investors, ranging from conservative risk-off, to moderately risk-on, to aggressively risk-on.

The various model portfolios usually provide a mix of assets according to how much risk an investor ought to take, which is determined by the answers given to the robo-advisor’s questions.

For example, traditional wisdom dictates that younger investors can take more risk because they have more time to make up for potential losses. On the other hand, older investors who find themselves closer to retirement are generally urged to take as little risk as possible, since steep losses could ruin their retirement plans.

Also keep some of the downsides of using a robo-advisor in mind, too. For example, there may be limited personalization and flexibility when using one, which may be a turn-off for some investors who want to take a more active hand in their portfolio. There’s also a lack of human contact, so you won’t be able to speak with someone at your brokerage as easily as you might like. The fees and costs, too, may be more than some investors want to pay.

6. Pay Down High-Interest Debts

While paying down debt may not seem like an “investment” in the traditional sense, it can serve as a sort of investment in your financial future by freeing up money that might go toward interest payments. Instead, you may be able to repurpose that money and funnel it into index funds, your retirement account, or more.

While how or if you choose to target your debt balances will depend on any number of factors, in most cases, it may be wise to try and pay down your debts with the highest applicable interest rate first — that will end up saving you the most money in the long run, as you save the most in interest.

As for how to do it? There are a lot of strategies to pay down debt out there, but it can start with some simple steps: Create a budget, set goals, utilize balance transfers, and more.

A couple of common debt-payoff strategies are the “snowball” and “avalanche” methods, which involve either paying off your debts with the lowest overall balance first, or your debts with the highest applicable interest rate – as mentioned. One or the other may work better for you, and it may be a good idea to try different strategies out to see what works.

Paying down debt is generally a good idea, but if there’s a downside to it, it’s the opportunity costs associated with the money you’re using to pay balances down. Think about this: If you instead invested or saved the money you’re using to pay down debt with, that money could grow or appreciate in the meantime – though there are no guarantees. Again, lowering debt burdens isn’t a bad thing, but opportunity costs may be something to keep in mind.

7. Create a Safety Net With High-Yield Savings Accounts

As interest rates shot up in 2022 and 2023, another potential avenue for growing your money is by putting it in a high-yield savings account. These accounts tend to offer higher interest than standard checking or savings accounts, and many banks offer them. It’s been some time since interest rates were actually attractive to investors, but heading into 2024, it may be worth seeing what your options are.

Finding the Best High-Yield Accounts

You’re likely to find numerous options for high-yield savings accounts out there, but some things you’ll want to look for include annual percentage yields (APY), required initial deposits, minimum balance requirements, applicable fees, and whether there’s a penalty for withdrawing your money.

What makes one account more attractive to you versus another will depend on your personal preferences. But generally, you’re looking for the highest APY, and lowest fees or costs associated with an account.

8. Explore Passive Income Opportunities

Why not invest in a passive income venture? That could be a side hustle, side gig, small business, or something similar. A lot of those opportunities will likely require at least a little startup capital, and many can be started for less than $1,000 — much less, in some cases.

Getting Started With Passive Ventures

There are dozens and dozens of ways to put your money to work and start a passive venture. Consider some of these ideas: Lend your money through a peer-to-peer lending platform, advertise using your personal vehicle, become a pet sitter, become a house cleaner, or even use some money to start a blog or publish an ebook.

Again, some of these will require a little startup cash, but if the chips fall in the right way, they could end up being lucrative passive income ventures.

Low-Investment Ideas for Passive Earnings

If you’re looking for investment opportunities, specifically, you can look at crowdfunding opportunities, buying an ETF or index fund, or even experimenting with a robo-advisor — all as mentioned. These may not provide passive “earnings” in the same way a small business venture would, but if the market sways in the right way, could provide some returns over time.

But, as always, do consider that all investing involves risk, as discussed. Not only that, but business ventures involve risk, as does lending out your money. These may be ways to earn or generate some passive income, but they all do have their associated risks.

9. Invest in Your Child’s Education with a 529 Plan

If you have children, or children in your life, you can also look at the possibility of investing in a 529 college savings plan. With education costs increasing every year, they’ll likely be thankful you did.

The Basics of 529 Plans

A 529 plan, or qualified tuition plan, allows parents or others to essentially pre-pay for a student’s tuition expenses, or contribution to an education-focused savings account. The contributions aren’t tax-deductible, but the distributions are tax-free for beneficiaries if they’re used on a qualified expense, such as tuition, books, and more.

Long-Term Benefits for Your Family

There are other options out there that can be used for saving or investing for education expenses. But the whole point is that these types of accounts can be used to ease the financial burden of college, offering tax-free growth. With student debt remaining a huge issue in the U.S., saving and investing for tuition earlier rather than later may be beneficial.

While 529 plans have benefits, there can be disadvantages as well. Funds can only be used for education purposes, for one, and there may be limited tax advantages depending on where you live and your specific financial situation. There are also fees and costs to consider, and investors should know that they won’t be able to take much of a hand in directing investments, either.

10. Consider Safe Bonds and T-Bills

If stocks, index funds, ETFs, or other investments seem a bit too risky, you can always look at relatively safe investments — which could include bonds and treasuries, or T-bills.

The Stability of Government Bonds

Treasuries, which are bonds that are issued by the federal government, and are generally considered to be one of, if not the safest investment on the market. That’s not to say that they aren’t without risk, but if treasuries become risky investments, there’s likely bigger issues to deal with in the economy than worrying about the value of your bond holdings. They can also be purchased directly from the government.

While Treasuries are relatively safe investments, they’re not without risk or downsides. For most investors, the primary disadvantage of Treasuries are that they provide low returns compared to other investments – but that’s typically the trade-off investors make to assume less risk.

Making Your Investment Work Harder

Investing your money — however you choose to do it — requires at least some research and consideration. At first, that is, depending on how you choose to invest or save it. But the point is to put the money away in a savings or investment account, allowing the market and time to work its magic, and hopefully seeing your balance or holdings accrue value over time.

When to Pivot Your Investment Strategy

Many investors may want to take a hands-off approach to investing, and that can work. Others may want to be more active. While you should perhaps consult with a financial professional to get a sense of what might work best for you, there are going to be times where you’ll want to consider pivoting your strategy.

As you move through life, your goals, risk tolerance, and time horizon will change – and so will your investment strategy. It may be difficult to tell when it’s time to adjust your strategy, but it can be a good idea to keep the fact that your strategy will change, at some point, in mind.

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.

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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN1023150

Dec

2023

Comprehensive Guide to Assets: Understanding Their Role and Value

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

You’ve probably come across the term “asset” many times in your life — long before you began saving and investing.

What is an asset? Generally, the word may be used to refer to anything of value — from a great work ethic to a great group of friends. But when you’re talking about finances, the term asset is typically used to refer to things that have economic value to a person, a company, and/or a government.

Exploring the Definition of an Asset

For individuals, an asset can mean pretty much everything they own — from the cash in their wallet to the car in their garage to necklaces, rings, and earrings in a jewelry box. But usually, when people talk about their personal assets, they’re referring to something worth money.

Broad Categories of Assets

Assets typically include such things as:

• Cash and cash equivalents, including checking and savings accounts, money market accounts, certificates of deposit (CDs), and U.S. government Treasury bills.

• Personal property, including cars and boats, art and jewelry, collections, furniture, and things like computers, cameras, phones, and TVs.

• Real estate, residential or commercial, including land and/or structures on the land.

• Investments, such as stocks and bonds, annuities, mutual funds and exchange-traded funds (ETFs), and so on.

Those who freelance or own a company also may have business assets that could include a bank account, an inventory of goods to sell, accounts receivable (money they’re owed by their customers), business vehicles, office furniture and machinery, and the building and land where they conduct their business.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

Delving Into Different Types of Assets

Generally speaking, there are four different types of assets: current or short-term assets, fixed assets, financial investments, and intangible assets.

Current Assets

Current assets are short-term resources with economic value, and are typically referred to in accounting. Current assets are things that can be used or consumed or converted to money within a year. They include things like cash, cash equivalents, inventory, and accounts receivable.

Fixed or Noncurrent Assets

Fixed assets are resources with a longer term, meaning more than a year. This includes property, like buildings and other real estate, and equipment.

Financial Assets

Financial assets refer to securities or assets such as stocks, bonds, certificates of deposit (CDs), and preferred equity.

Intangible Assets

Assets considered intangible are things of value that don’t have a physical presence. This includes intellectual property like patents, licenses, trademarks, and copyrights, and brand value and reputation.

Identifying and Classifying Assets

Assets are things with economic value. They may be owned by you, like a sofa or your computer, or owed to you, like the $50 you loaned a friend. The loan or borrowed money is considered an asset for you since your friend will repay it to you.

Personal vs Business Assets

There are both personal assets and business assets. Personal assets include such things as your home, artwork you might own, your checking account, and your investments. Business assets are things like equipment, cash, and accounts receivable.

Liquid Assets and Their Convertibility

Liquid assets are things of economic value that can be quickly and easily converted to money. Liquid personal assets might include certain stocks, and liquid business assets could include inventory.

Assets in Accounting and Business Operations

In business, assets are resources owned by a business that have economic value. They might refer to the building the business owns, inventory, accounts receivable, office furniture, and computers or other technology.

How Assets Reflect on Financial Statements

Business assets are listed on a company’s financial statements. Ideally, a company’s assets should be balanced between short-term assets and fixed and long-term assets. That indicates that the business has assets it can use right now, such as cash, and those that will be available down the road.

The Distinction Between Assets and Liabilities

Assets are resources an individual or business owns that have economic value. Assets are also things owed to a business or individual, such as payment for inventory. A liability is when a business or individual owes another party. It could include things like money or accounts payable.

Asset Valuation and Depreciation

Asset valuation is a way of determining the value of an asset. There are different methods for determining value, such as the cost method, which bases an asset’s value on its original price. But assets can depreciate over time. That’s when an accounting method known as depreciation is used to allocate the cost of an asset over time.

Real-World Examples of Assets

As noted, assets can run the gamut from the physical to the intangible. What they all have in common is that they have economic value.

Everyday Items That Count as Assets

Many items that you use or deal with in your daily life are considered assets. This includes:

• Cash

• Bank accounts

• Stocks

• Bonds

• Money market funds

• Mutual funds

• Furniture

• Jewelry

• Cars

• House

• Certificates of deposit (CDs)

• Retirement accounts, such as 401(k)s

High-Value Assets in Today’s Market

The larger assets you own tend to be more valuable, such as your house, a vacation home, or rental property. Your investments may also be considered high-value assets, depending on how much they are worth.

💡 Quick Tip: Automated investing can be a smart choice for those who want to invest but may not have the knowledge or time to do so. An automated investing platform can offer portfolio options that may suit your risk tolerance and goals (but investors have little or no say over the individual securities in the portfolio).

The Nuances of Non-Physical and Intangible Assets

Intangible assets, or those that have no physical presence, can be extremely important and quite valuable. So it’s wise to be aware of what they are.

Understanding Goodwill, Copyrights, and Patents

Intangible assets are such things as copyrights (on a book or piece of music, for instance) and patents (for an invention). A copyright protects the owner who produced it, and a patent protects the patent owner/inventor. What this means is that another party cannot legally use their work or invention without their permission.

Goodwill is another intangible asset, and it’s associated with the purchase of one company by another company. It is the portion of the purchase price that’s higher than the sum of the net fair value of all of the company’s assets bought and liabilities assumed.

For example, such things as brand value, reputation, and a company’s customer base are considered goodwill. These intangibles could be highly valued and the reason why a purchasing company might pay more for the company they are buying.

The Role of Digital Assets in the Modern Economy

Digital assets refer to such things as data, photos, videos, music, manuscripts, cryptocurrency, and more. Digital assets create value for the person or company that owns them.

Digital assets are becoming increasingly important as individuals, businesses, and governments use them more and more. With more of our every day resources online, and with data stored digitally, these types of assets are likely to be considered quite valuable.

Labor and Human Capital: Are Skills and Expertise Assets?

Labor is not considered an asset. Instead, it is work carried out by people that they are paid for.

Human capital refers to the value of an employee’s skills, experience, and expertise. These things are considered intangible assets. However, a company cannot list human capital on its balance sheet.

Navigating Asset Management

As an investor, you’re also likely to hear about the importance of “asset allocation” or “asset management” for your portfolio. Asset allocation is simply putting money to work in the best possible places to reach financial goals.

The idea is that by spreading money over different types of investments — stocks, bonds, cash, real estate, commodities, etc. — an investor can limit volatility and attempt to maximize the benefits of each asset class.

For example, stocks tend to offer the best opportunity for long-term growth, but can expose an investor to more risk. Bonds tend to have less risk and can provide an income stream, but their value can be affected by rising interest rates. Cash can be useful for emergencies and short-term goals, but it isn’t going to offer much growth, and it won’t necessarily keep up with inflation over the long term.

When it comes to volatility, each asset class may react differently to a piece of economic news or a national or global event, so by combining multiple assets in one portfolio, an investor may be able to help mitigate the risk overall.

Alternative investments such as real property, precious metals, and private equity ventures are examples of assets some investors also may choose to use to counter the price movements of a traditional investment portfolio.

An investor’s asset allocation typically has some mix of stocks, bonds, and cash — but the percentages of each can vary based on a person’s age, the goals for those investments, and/or a person’s tolerance for risk.

If for example, someone is saving for a wedding or another shorter-term financial goal, they may want to keep a percentage of that money in a safe, easy-to-access account, such as a high-yield online deposit account. An account like this would allow that money to grow with a competitive interest rate while it’s protected from the market’s unpredictable movements.

But for a longer-term goal, like saving for retirement, some might invest a percentage of money in the market and risk some volatility with stocks, mutual funds, and/or ETFs. This way the money may potentially grow over the long-term, and there may likely be time to recover from market fluctuations. As retirement nears, some people may wish to slowly shift their investments to an allocation that carries less risk.

The Role of Automated Asset Management Solutions

Businesses may want to consider using automated asset management systems to track and collect data on their assets. This may be easier than manually tracking assets, which could become complicated and overwhelming. There are a number of different software programs available that could help businesses with this.

Individual investors might want to think about automated investing programs to help manage their financial portfolio. These platforms may help those who want to invest for the long-term but don’t have the time or expertise to do it themselves.

However, It’s important to do your homework and consider the risks involved since automated platforms are not fully customized to each individual’s specific needs. You also need to be comfortable with the types of investments they may offer, such as ETFs, and make sure you understand the risks and possible costs involved.

Unpacking Asset Classifications Further

The assets you accumulate will likely change over time, as will your needs and your goals. So, it’s important to know the purpose of each asset you own — as well as which ones are working for you and which ones aren’t. Here are some questions you can ask yourself as you mindfully manage your assets:

1. Are you getting the maximum return on your investment, whether it’s a savings account or an investment in the market?

2. How does the asset make money (dividends, interest, appreciation)? What must happen for the investment to increase in value?

3. How does the asset match up with your personal and financial goals?

4. Is the asset short-term or long-term?

5. How liquid is the investment? How hard would it be to sell if you needed money right away?

6. What are the risks associated with the investment? What is the most you could lose? Can you handle the risk financially and emotionally?

If you aren’t sure of the answers to these questions, you may wish to get some help from a financial advisor who, among other things, can work with you to set priorities, suggest strategies for investing, assist you in coming up with the right asset allocation to suit your needs, and draw up a coordinated and comprehensive financial plan.

Short-term vs Long-term Assets

As a quick recap, short-term assets are those held for less than one year. They are also known as current assets. These assets are typically meant to be converted into cash within a year and are considered liquid. For individual investors they can include such things as money market accounts and CDs.

Long-term assets are those held for more than one year. Long-term assets can be such things as stock and bonds, as well as fixed assets such as property and real estate. Long-term assets also include intellectual property such as copyrights and patents. Long-term assets are not as liquid as short-term assets.

The Importance of Asset Liquidity

Liquid assets can be accessed quickly and converted to cash without losing much of their value. Cash is the ultimate liquid asset, but there are plenty of other examples.

If you can expect to find a number of interested buyers who will pay a fair price, and you can make the sale with some speed, your asset is probably liquid. Stock from a blue-chip company is generally an asset with liquidity. So, typically, is a high-quality mutual fund.

Some assets are non-liquid or illiquid. These assets have value, but they may not be as easy to convert into cash when it’s needed. Your car or home might be your biggest asset, for example, depending on how much of it you actually own. But It might take a while to get a fair price if you sold it — and you’ll likely need to replace it eventually.

While some investments have long-term objectives — including saving for a secure retirement — liquidity can be an important factor to consider when evaluating which assets belong in a portfolio.

Many unexpected events come with big price tags, so it can help to have some cash or cash equivalents on hand in case an urgent need comes up. General recommendations suggest having three to six months’ worth of living expenses stashed away in an emergency fund — using an account that’s available whenever you need it.

Some might also consider keeping a portion of money in investments that are reasonably liquid, such as stocks, bonds, mutual funds and exchange-traded funds (ETFs). This way, ideally, the assets can be liquidated in a relatively quick timeframe if they are needed. (Although, of course, there’s never any guarantee.)

Choosing that original asset allocation is important — but maintenance and portfolio rebalancing is also key over time. As people attain some of their short- or mid-range goals (paying for that wedding, for instance, or getting the down payment on a house) they may wish to consider where the money will go next, and what kind of account it should be in.

As life changes, it is possible that the original balance of stocks vs. bonds vs. other investments is no longer appropriate for a person’s current and future needs. As a result, they may want to become more aggressive or more conservative, depending on the situation.

Rebalancing also may become necessary if the success — or failure — of a particular asset group alters a portfolio’s target allocation.

If, for example, after a big market rally or long bull run (both of which we’ve experienced in recent years) a 60% allocation to stocks becomes something closer to 75%, it may be time to sell some stock and get back to that original 60%. This way, an investor can protect some of the profits while buying other assets when they are down in price.

You can do your rebalancing manually or automatically. Some investors check in on their portfolio regularly (monthly, quarterly or annually) and adjust it if necessary. Others rebalance when a set allocation shifts noticeably.

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

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

Dec

2023

7 Online Financial Calculators to Power Your Personal Finances

By Janet Siroto | Budgeting & Goals, Family Finances, invest, Life & Career, personal_loan, student_loan | No Comments

Your personal finances can be an important but challenging aspect of your life to manage. Even if you are brilliant at math, computing things like the payoff amount on student loans or the optimal goal for retirement savings can be complicated.

That’s where financial calculators can swoop in and help you. These tools can make it simple to see how much you are spending in, say, credit card interest or what a mortgage payment might look like on your dream house.

Here’s a resource with a variety of financial calculators. Read on to learn what kind of assistance is out there to help you take control of your money and your goals.

1. Student Loan Calculator

There are plenty of student loan calculators out there that can help you estimate your monthly payment and total interest cost.

In addition, you are likely to find student loan refinancing calculators to get a basic idea of how refinancing might affect your bottom line.

Typically, you enter your current loan information, then adjust the term “slider” to see how your monthly payment and total savings amount could be impacted by refinancing.

You could see valuable information like how much you might be able to save every month by refinancing or how much you could potentially save over the lifetime of a loan if you were to refinance. (Calculated payments and savings are only estimates, and don’t factor in your current credit picture or financial situation.)

Just keep in mind that refinancing isn’t necessarily the right choice for everyone. If you have federal student loans and refinance, you will forfeit federal protections and benefits. Also, if you refinance for an extended term, you may pay more interest over the life of the loan.

💡 Quick Tip: A low-interest personal loan from SoFi can help you consolidate your debts, lower your monthly payments, and get you out of debt sooner.

2. Retirement Calculator

It’s almost impossible for one online retirement calculator to take into account all the variables that retirement planning requires. But a calculator could still be useful to give you a general idea of how much money you may want to be saving and how big your retirement nest egg could grow.

It might also give you some insight into how much you’re contributing now, and if you might want to think about adjusting your IRA (individual retirement account), 401(k), or other retirement investment.

One online tool that may be helpful is AARP’s Retirement Calculator . It asks for quite a bit of information, including information about your age, income, current savings and lifestyle expectations in retirement (i.e., will you need more, less, or the same amount of money as you now spend).

The calculator then gives an estimate of how much wealth you’re likely to accumulate and changes you could make — like working longer or saving more — that might help improve your outcomes. Understanding when to retire and what your expenses will be like at that life stage can be an important part of your future planning.

3. Budgeting Calculator

Making a budget — and sticking to it — is one important step on the road to financial security. By making a budget and sticking to it, you might be able to save some extra cash and even be able to gain some new insight and understanding about how you’re currently spending your money.

Setting up a budget might have a snowball effect, potentially empowering you to save even more money once you have a holistic view of current spending. By tracking your finances with a budgeting tool, you can get a better sense of how your earnings, spending, and savings are tracking. It can also help you course-correct if, say, you get hit with a big unexpected bill or move to an area with a different cost of living.

4. & 5. Credit Card Debt Payoff Calculator

Various tools can be helpful if you’re focused on paying down some credit card debt.

• You might want to use this debt snowball calculator to figure out how long it could take you to completely pay down your balance. In this method, you eliminate your smallest debt first, which can build your motivation. You may want to see how increasing your monthly payments could affect your debt and help you save on interest, which might help keep you motivated in your payoff goals.

You could also use a calculator to see how much faster you could pay off your debt with the debt avalanche method. With this technique, you go after your highest interest-rate debt first.

• Additionally, to take a look at debt in terms of your credit card interest rate, you might spend some time using a credit card interest calculator. Since credit card debt can be one of the most challenging debts to pay off, you might want to understand how much you are paying overall.

This kind of calculator shows roughly how much interest you could end up paying on your credit card debt. It can give a broad estimate of when that debt could be paid off in full if you continue to make the same payments. Equipped with that information, you might decide to opt for a different way to pay down your debt, such as looking for a lower-interest personal loan.

6. Student Loan Payoff Calculator

If you’re budgeting for your student loans, you could try working with a student loan payoff calculator. Simply add your basic information, and it calculates when your estimated payoff date could be. Plus, you can often click through and discover additional information and tips you could use to potentially shorten that payoff period.

Some of these ideas might include things like seeing if you can find a lower interest rate or making additional payments. Plugging these two data points into the calculator might give you a basic estimate of how much sooner you could pay off your loans.

7. Housing Costs Calculator

Is your attention focused on buying a home? Are you all about mood boards for the primary bedroom and vegetable garden you’ll plant? Then you’re in the right place.

A home affordability calculator can help you look at how much house you can afford. It will help you factor in such considerations mortgage amount, interest rate, property taxes, and so forth. It can be a great way to get a handle on just how much homeownership might cost you.

Additionally, a mortgage calculator can help you get a sense of how much you can save on your monthly payment by changing your down payment. This intel can help you decide whether to start bidding soon or wait until you have a bigger chunk of cash to put down.

These tools can help you decide whether to rent or buy in the near future, as well as (when buying) how to determine the right balance of down payment and financing to suit your budget.

Get Started on Your Goals With These Tools

Your goals are probably pretty unique to you and where you’re at career-wise, with money, and maybe even with outstanding loans. So there’s probably not one end-all, be-all financial calculator to help you achieve all of your financial goals. But there are an array of tools that can help you track your money and determine good options as you move forward.

As you evaluate where your finances stand, you may want to consider ways to pay down debt, such as using a personal loan to eliminate high-interest debt and lower your monthly outlay of funds.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

SOPL1223021

Dec

2023

Consumer Price Index (CPI): What Is CPI?

The Consumer Price Index (CPI): A Comprehensive Guide

By Austin Kilham | Growing Wealth, invest, Investing, Terminology | Comments Off

The Consumer Price Index (CPI) is a monthly measure of how the aggregate costs of consumer goods and services in the United States are changing. Economists use CPI to help them understand whether the economy is in a period of inflation or deflation, and individuals can use it to get a sense of where prices might be headed.

What Is the Consumer Price Index (CPI)?

The CPI measures the change of the weighted-average prices paid by urban consumers for select goods and services, according to the Bureau of Labor Statistics (BLS). In other words, the metric tracks the rise and fall of prices over a given period of time.

Definition and Significance

As mentioned, “CPI” is short for Consumer Price Index, and it’s an often-cited economic indicator.

The BLS produces indexes that cover two populations: CPI-U covers all urban consumers, representing more than 90% of the population. And CPI-W represents urban wage earners and clerical workers, representing approximately 30% of the population. The CPI excludes people who live in rural areas, the military, and imprisoned people.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

How the CPI Works

cpi year over year change 2020-2024

The CPI tracks prices for a basket of goods and services people commonly buy in eight major categories, including:

• Food and beverage

• Recreation

• Apparel

• Transportation

• Housing

• Medical care

• Education and communication

• Various services

CPI Formulas

Each month, the BLS contacts retailers, service providers, and rental spaces across the country gathering prices for about 80,000 items. It uses this data to calculate CPI using the following formula:

CPI = Cost of the Market Basket in a Given Year/Cost of the Market Basket in the Base Year.

The result is multiplied by 100 to express CPI as a percentage. The BLS uses the years 1982-1984 as its base year. It set the index level during this period at 100.

Annual CPI Calculation

Here’s an example of the annual CPI calculation, and comparing two different years to get a gist of the differences.

Imagine the cost of a hypothetical basket of goods in 1984.

	Sweatshirt	1 dozen eggs	Movie ticket
Price in 1984	$10	$1.50	$5
Quantity	2	6	10
Total Cost	$20	$9	$50

When you total the price of these goods you get $79. Using the CPI formula above you take $79/$79 x 100 = 100%. This is where the 1984 base rate of 100 comes from.

Now let’s consider the same basket of goods in 2023.

	Sweatshirt	1 dozen eggs	Movie ticket
Price in 2023	$24	$3	$15
Quantity	2	6	10
Total Cost	$48	$18	$150

When you total the prices of these goods you get $216. Now, when you plug this into the CPI formula you get $216/$79 x 100 = 273%. You can now tell that from 1984 to 2023 prices for this particular basket of goods have risen by 173%.

Diverse Categories Within CPI

The CPI tracks more than 200 categories of items, and within each category it samples hundreds of specific items at various businesses which serve to represent the thousands of items available to consumers. In addition to these categories, CPI includes government-charged user fees like water, sewages, tolls, and auto registration fees. It also factors in taxes associated with the price of goods such as sales tax and excise tax. However, it does not include Social Security taxes or income taxes that aren’t directly related to the purchasing of goods and services.

The CPI also does not include the purchase of investments, like stocks and bonds.

The Consumer Price Index (CPI) in Practice

The CPI can be used in a variety of ways, but perhaps most prominently, in economic policy.

Usage in Economic Policy

The CPI is the most common way to measure inflation, the economic trend of rising prices over time, or deflation, the trend of falling prices. The federal government — or the Federal Reserve, more specifically — sets a target inflation rate of 2% annually, and the CPI can help the government understand whether or not its monetary policy is effective in meeting this target.

The Federal Reserve’s Utilization

The Federal Reserve may look at the CPI to gauge whether or not to raise interest rates, which may cool or heat up the economy, accordingly, by increasing the cost of borrowing. As borrowing costs go up, demand for goods or services tends to fall, lowering prices, and putting downward pressure on the CPI.

Implications for Other Government Agencies

Economists also use CPI as a measure of cost of living, the amount of money you need to cover basic expenses, such as housing, food, and health care. This is important because the government may make cost-of-living adjustments to programs such as Social Security benefits. As the cost of living rises, benefit amounts may be adjusted higher to keep up with the rising costs of goods.

Employers may also look at the cost of living to help them set competitive salaries and determine when to raise wages for employees.

Recommended: Cost of Living by State

CPI’s Influence on Market Sectors

The CPI can also have an influence on market sectors, like the housing markets, financial markets, and even labor markets. As noted, a lot of it is top-down — depending on how the Federal Reserve reads the CPI and decides to change interest rates, if at all.

Raising rates can temper demand in the housing market, as a mortgage can become more expensive. It can also slow down sales for all sorts of businesses, which is reflected in earnings reports and finally, in the stock market. That can then spill into the labor market, and potentially raise unemployment as companies look to cut costs.

All told, the CPI’s influence can run deep in an economy.

CPI Versus Other Economic Indicators

The CPI is only one of many economic indicators, as mentioned. Others include unemployment, and the Producer Price Index (PPI).

CPI vs Unemployment: Understanding the Relationship

As noted, there tends to be a relationship between the CPI and unemployment rate, as the Fed targets 2% inflation, and full employment. As such, it can decide to make changes to monetary policy to try and restore balance or at least get closer to its goals.

CPI vs PPI (Producer Price Index)

The Producer Price Index or PPI measures the average change over time in the selling prices received by domestic producers of goods and services. In simpler terms, this metric measures wholesale prices for the sectors of the economy that produce goods. Like the CPI, the PPI can help analysts estimate inflation, as higher prices will show up on the wholesale level first before they get passed on to consumers at the retail level.

Analyzing and Critiquing the CPI Methodology

The CPI is a useful measure in many ways, but it does have some limitations. First, it doesn’t apply to all populations in the United States. CPI considers urban populations alone, so it is not necessarily representative of the costs for those who live outside of those areas.

Also, the CPI calculation does not take into account all of the goods and services available to consumers or new technologies not yet considered consumer staples. What’s more, the metric does not provide any contact into what’s causing prices to move up and down, such as social or environmental trends.

CPI’s Broader Impact and Usage

CPI reports are issued monthly by the BLS, and are available to anyone who wants to access them online. They give a broad breakdown of the previous month, and compare price changes year-over-year, and month-over-month.

Breaking Down the Monthly CPI Report

The standard CPI report has an introduction that discusses the changes over the previous month, followed by a table that outlines changes in specific price categories over the past year and several months. It further breaks down food, energy, and “all items less food and energy,” providing additional insight for each category.

Anticipating the Next CPI Report

The BLS publishes the date and time of the upcoming CPI report on its website, typically the second week of the month, at 8:30am ET.

Contemporary Relevance of CPI

In recent years, many people have kept a closely-trained eye on the CPI and CPI reports due to increased costs following the pandemic in 2020. While there were a variety of reasons as to why prices increased, that bout of inflation — the first serious case of inflation since the 1980s — caught many people off guard, and strained consumers’ budgets.

It also led to the Fed increasing interest rates. Inflation, or the increase in the CPI over the past couple of years, peaked at more than 9% during the summer of 2022, and as of late 2023, was back down to around 3.1%.

Educational Resources and Further Reading on CPI

There are numerous resources and places to learn more about the CPI, especially after all the attention it has garnered in recent years.

Learning More About CPI

A simple internet search will net a cornucopia of results, loaded with information and insight into the CPI. You’re also likely to find opinion pieces and other media discussing the CPI’s shortcomings or strengths — it can be a good idea to consider everything, and formulate your own opinion.

But in terms of learning more about the CPI itself, the BLS publishes a handbook discussing the concepts and methods it uses, which can also be helpful if you’re hoping to bolster your CPI IQ.

CPI-Related Statistics and Where to Find Them

The BLS publishes the CPI, and a whole host of data and statistics related to it. With that in mind, it can be a great place to start when hunting down CPI-related data. There are multiple other sources that utilize the BLS’ data to compile charts, graphs, and more, but typically, it’s all sourced back to the BLS.

The Bottom Line: Why the CPI Matters to Everyone

Rising inflation decreases the value of individuals’ cash savings over time. Investing in stocks, bonds and other investments that offer inflation-beating returns may help consumers protect the value of their savings. Understanding CPI, and how it’s moving, can help you devise a strategy for your investment portfolio.

The CPI can be a deep topic, especially when you consider how it intersects and relates to other elements of the economy, such as unemployment and interest rates. And again, the more an investor understands about the underlying machinations of the economy, the more knowledge they’ll have to power their decisions in the market.

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

Photo credit: iStock/Prostock-Studio

SoFi Invest®

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

Dec

2023

What Is Initial Margin? Initial Margin Definition & Examples

What Is Initial Margin? Examples and Minimums

By Colin Dodds | Growing Wealth, invest, Investing | Comments Off

When an investor buys a security using a margin account, the initial margin or initial margin requirement is how much of the purchase price – represented as a percentage – that the investor must cover with either cash or the collateral in that account.

The Federal Reserve Board’s Regulation T sets the minimum initial margin at 50%, meaning investors trading on a margin account must have cash or collateral to cover at least half of the market value of the securities they buy on margin.

Using Initial Margin

Investors who want to open a margin account at a brokerage must first deposit the initial margin requirement. They can make that deposit in the form of cash, securities or other collateral, and the amount they deposit will vary depending on how much trading the investor plans to do on margin, and where the brokerage firm sets its initial margin.

Once the investor makes that initial margin deposit as collateral, they essentially have a line of credit with which they can begin margin trading. That line of credit allows the investor to buy securities with money borrowed from the brokerage.

As noted, Regulation T sets minimum initial margin levels. It’s important to note, however, that the Federal Reserve Board’s Regulation T only sets the minimum for margin accounts. Brokerage firms offering margin accounts can set their initial margin requirement higher than 50% based on the markets, their clients, and their own business considerations. But brokerages cannot set the initial margins for their clients any lower than 50%. The level that a brokerage sets for margin is known as the “house requirement.”

Risks of Margin Trading

Trading on margin brings its own unique set of opportunities and risks. It can lead to outsized profits if investors buy appreciating stocks on margin. But if investors buy sinking securities on margin, they can lose even more than if they’d purchased the securities outright.

In the unfortunate situation where the securities purchased on margin lose all value, the investor must deposit the full purchase price of the securities to cover the loss. Given these risks, you’re typically not able to trade on margin in retirement accounts such as an IRA or a 401(k).

Sometimes investors use margin to short a stock, or bet that it will lose value. In that instance, they’d borrow shares from the brokerage firm that holds a position in the stock and sell them to another investor. If the share price goes down, the investor can purchase them back at a lower price.

In general, investors looking for safer investments might want to avoid margin trading, due to their inherent risk. Investors with a high appetite for risk, however, might appreciate the ability to generate outsize returns.

💡 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.

How Do You Calculate Initial Margin?

An investor who wants to trade in a margin account, must first determine how much to deposit as an initial margin. While that will depend on how much the investor wants to trade, and how big a role margin will play in their strategy, there are some guidelines.

The New York Stock Exchange and some of the other securities exchanges require that investors have at least $2,000 in their accounts. For day traders, the minimum initial margin is $25,000. Each brokerage has its own set of requirements in terms of the amount clients need to keep as collateral, and the minimum size of the account necessary to trade on margin.

Increase your buying power with a margin loan from SoFi.

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

*For full margin details, see terms.

Initial Margin Requirement Examples

It’s possible, for example, that a brokerage firm might require 65% initial margin. That’s the first number an investor needs to know. The next is how much they plan to invest. The initial margin calculation simply requires the investor to multiply the investment amount by the initial margin requirement percentage. For an investor who wants to buy $20,000 of a given security, they will take that purchase price, multiply it by the margin requirement is 65% or 0.65 – to arrive at an initial margin requirement of $13,000.

The advantage for the investor is that they get $20,000 of exposure to that stock for only $13,000. In a scenario where the investor is buying a stock at a 50% margin, that investor can buy twice as many shares as they could if they bought them outright. That can double their return if the stock goes up. But if the stock drops, that investor could lose twice as much money.

If the price falls far enough, the investor could get a margin call from their broker. That means that they must deposit additional funds. Otherwise, the broker will sell the stock in their account to cover the borrowed money.

Initial Margin vs Maintenance Margin

For investors who buy securities on margin, the initial margin is an important number to know when starting out. But once the investor has opened a margin account at their brokerage, it’s important to know the maintenance margin as well.

The maintenance margin is the minimum amount of money that an investor has to keep in their margin account after they’ve purchased securities on margin. It is generally lower than the initial margin.

Currently, the minimum maintenance margin, as set by the Financial Industry Regulatory Authority (FINRA,) is 25% of the total value of the margin account. As with the initial margin requirements, however, 25% is only the minimum that the investor must have deposited in a margin account. The reality is that brokerage firms can – and often do – require that investors in margin accounts maintain a margin of between 30% to 40% of the total value of the account.

Some brokerage firms refer to the maintenance margin by other terms, including a minimum maintenance or a maintenance requirement. The initial margin on futures contracts may be significantly lower.

Maintenance Margin Example

As an example of a maintenance margin, an investor with $10,000 of securities in a margin account with a 25% maintenance margin must maintain at least $2,500 in the account. But if the value of their investment goes up to $15,000, the investor has to keep pace by raising the amount of money in their margin account to reach the maintenance margin, which rises to $3,750.

Maintenance Margin Calls

If the value of the investor’s margin account falls below the maintenance margin, then they can face a margin call, or else the brokerage will sell the securities in the account to cover the difference between what’s in their account and the maintenance margin.

With a maintenance margin, the investor could also face a margin call if the investment goes up in value. That’s because as the investment goes up, the percentage of margin in relation by comparison goes down.

The Takeaway

Initial margin requirements and maintenance margins are just two considerations for investors who are looking to trade on margin. They allow investors to understand how much cash they need to hand on hand in order to trade on margin — and when they might be susceptible to a margin call.

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 an example of initial margin?

If initial margin is 65% and an investor wants to purchase $20,000 of a given security, they will take that purchase price, multiply it by the margin requirement is 65% or 0.65 – to arrive at an initial margin requirement of $13,000.

Is initial margin refundable?

Yes, initial margin is refundable, as it acts as a deposit put forward to enact a transaction or trade.

Why is initial margin important?

Initial margin is important because it acts as a form of collateral to cover a loss in the event loses money using borrowed funds. It helps the lender – or brokerage – recoup some of those losses.

Why is initial margin paid?

Initial margin is paid or put forth to act as a deposit or a form of collateral and establish good faith between a borrower and lender, typically an investor or trader and their brokerage.

Who sets the initial margin requirement?

Initial margin requirements are established by the Federal Reserve’s Regulation T. But there can also be other requirements put in place by an individual brokerage, and FINRA’s additional margin rules can further increase the amount.

Does initial margin have to be cash?

Generally, initial margin needs to be in the form of cash deposits, but it’s possible that some brokerages will allow it to take the form of other securities, such as government bonds.

Is initial margin a cost?

Initial margin is not a cost per se, but a form of collateral, and is money that is returned or refunded like a deposit. As such, it’s not spent or a typical “cost,” though it may be a financial barrier of sorts for some traders.

Photo credit: iStock/FG Trade

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.

*Borrow at 11%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN1023155