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Although gas prices hit new highs in 2022, that wasn’t the first time gas numbers have spiked. A look back at the average national gas price in previous decades can provide some context. So can observing how state regulations affect the price of gas in your area.

Keep reading to learn more about historical gas prices, get a sense of how things have changed over time, and learn tips for finding cheap gas in your area.

Why Gas Prices Are Rising in 2023

As anyone who’s gone to the pump in the past couple of years knows, filling up isn’t as cheap as it used to be. Gas prices have risen in the second half of 2023, due in large part to a drop in global oil production. In early October of 2023, the average price of gas was $3.77 per gallon, according to AAA — up 60 cents from the $3.17 average at the beginning of the year. Still, that’s lower than what consumers paid in June 2022, which saw the highest recorded average of $5.03.

Fuel prices have been soaring for a few reasons. Prior to coronavirus’s arrival in the U.S. in 2020, gas cost around $2.50 per gallon. During the pandemic, as fewer Americans were driving to work or for pleasure, the price of oil plummeted.

In 2021 people started driving and flying again, and demand for gas surged. The supply couldn’t keep up, so the price of gas increased.

Prices dropped a little in early 2022 as things started getting back to normal — until late February, when Russia invaded Ukraine. The ensuing war led to a steep increase in prices as Europe, the U.S., and other countries agreed to stop buying Russian oil.

Then, in mid-2023, Russia and Saudi Arabia announced an extension of their oil production cuts, which caused prices to jump up yet again. The U.S. Energy Information Administration expects gas prices to continue rising over the rest of the year.


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

Average Price by State for Regular Unleaded in October 2023

Data is courtesy of AAA .

Average Price by State for Premium in October 2023

Data is courtesy of AAA.

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

Average Price by State for Diesel Gas in October 2023

Data is courtesy of AAA.

Average US Gas Price 1978 to 2022

Historical data courtesy of Axlewise. Prices are adjusted for inflation and shown in 2020 dollars.

Tips for Finding Cheap Gas Stations in Your State

There are a few ways to find the cheapest gas in the nearby area and save money on your gas bill:

•   Use an app like GasBuddy to locate the lowest nearby price. The app lets drivers search by gas type, payment type, the brand of gas station, and other factors. The app also offers cashback deals, paid subscriptions, and more.

•   AAA has a gas price monitoring website that gets updated every day. Drivers can search by state and country to find the best prices.

•   Both Google Maps and Waze keep track of gas prices. When you search for gas stations within their maps, the price of gas at local stations will pop up. Although one can’t filter by price or automatically see the lowest price, it’s fairly easy to look around and find the cheapest option.

•   Another useful app is GetUpside. The app lets users compare gas prices near them, and also earn cash back every time they fill up their tank.

•   Besides the ability to buy in bulk, one of the perks of getting a Costco or Sam’s membership is getting discounts on gas. It’s often the cheapest option for club members.

•   Certain days of the week tend to have lower prices. Generally, Mondays are the cheapest, followed by Sunday, while Wednesday and Thursday are the most expensive days.

Recommended: What Credit Score is Needed to Buy a Car

The Takeaway

Gas prices go up and down in response to a variety of global and domestic factors. But there are a few ways to source the best deals on gas and stay within your budget, including apps and membership-only retailers.

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

FAQ

What was the price of gas in 1980?

In 1980, the average price of gas was $1.19. That is equivalent to $4.60 in 2023 dollars.

What year were gas prices the highest?

Before 2022, the highest average gas price was $4.11 in July 2008.

How much did gas cost in the 90s?

In the 1990s, gas cost between $1.11 and $1.15 per gallon.

Photo credit: iStock/skodonnell

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.

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.

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.

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Paying student loans on time can have a positive effect on your credit score and help build a good credit history. On the flip side, when you have a late or missed student loan payment, that can be reflected on your credit report as well. Delinquent payments can lower your credit score and have financial repercussions, such as impacting your ability to qualify for a new credit card, car loan, or mortgage.

If you’re wondering how to remove student loans from a credit report, the answer is that it’s only an option if there’s inaccurate information on the report. Student loans are eventually removed from a credit report, however, after they’re paid off or seven years after they’ve been in default. Here’s what to know about student loans on a credit report, what happens when you default on a loan, and how to remove student loans from a credit report if there’s inaccurate information.

What Is a Credit Report?

Before considering the impact of student loans on your credit report, it’s helpful to review what a credit report is. It’s a statement that includes details about your current and prior credit activity, such as your history of loan payments or the status of your credit card accounts.

These statements are compiled by credit reporting companies who collect financial data about you from a range of sources, such as lenders or credit card companies. Lenders use credit reports to make decisions about whether to offer you a loan or what interest rate they will give you. Other companies use credit reports to make decisions about you as well – for example, when you rent an apartment, secure an insurance policy, or sign up for internet service.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

Defaulting on Student Loans

It’s also worth reviewing what happens when a student loan goes into default. One in ten people in the United States has defaulted on a student loan, and 5% of total student loan debt is in default, according to the Education Data Initiative.

The point when a loan is considered to be in default depends on the type of student loan you have. For a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program, you’re considered to be in default if you don’t make your scheduled student loan payments for a period of at least 270 days (about nine months).

For a loan made under the Federal Perkins Loan Program, the holder of the loan may declare the loan to be in default if you don’t make any scheduled payment by its due date. The consequences of defaulting on student loans can be severe, including:

•   The entire unpaid balance of your student loans, including interest, could be due in full immediately.

•   The government can garnish your wages by up to 15%, meaning your employer is required to withhold a portion of your pay and send it directly to your loan holder.

•   Your tax return and federal benefits payments may be withheld and applied to cover the costs of your defaulted loan.

•   You could lose eligibility for any further federal student aid.

And you don’t have to default on your student loans to experience the consequences of nonpayment. Even if your payment is only a day late, your loan can be considered delinquent and you can be charged a penalty fee.

Temporary Relief for Borrowers Behind on Payments

The pandemic-era pause on federal student loan payments that was established in March 2020 finally came to an end in the fall of 2023. After more than three years of having this financial responsibility off their plates, federal student loan borrowers must now fit payments back into their budgets. However, in order to protect financially vulnerable borrowers from facing the steep consequences of missing payments during this transition, the Biden Administration established a 12-month “on-ramp” program to help them adjust.

From Oct. 1, 2023, to Sept. 30, 2024, borrowers who don’t pay their federal student loans will be free of the usual repercussions. Specifically, this means that:

•   Loans will not be considered delinquent or in default.

•   Missed payments will not be reported to the credit bureaus.

•   Missed payments will not be referred to debt collection agencies.

•   Unpaid student loan interest will not capitalize (be rolled into the principal balance) once the on-ramp period ends.

However, payments missed during this period will be due once it ends. Additionally, any missed payments will not count toward forgiveness under income-driven repayment or Public Service Loan Forgiveness (PSLF).

How Long Do Student Loans Remain on a Credit Report?

If you are delinquent on your student loans or go into default, that activity is reported to the credit bureaus. It will remain on your credit report for up to seven years from the original delinquency date.

The good news is that the more time that passes since your missed payment, the less impact it has on your credit score.

The exception to this is a Federal Perkins Loan, which is a low-interest federal student loan for undergraduate and graduate students who have exceptional financial need. This type of loan will remain on your credit report until you pay it off in full or consolidate it.

On the other hand, if you made timely payments on your loan and paid it off in full, it may appear on your credit report for up to 10 years as evidence of your positive payment history and can boost your credit score.

How Do I Dispute a Student Loan on My Credit Report?

It’s a good habit to periodically check your credit report. You can request a free report from each of the three major credit reporting agencies—Equifax, Experian, and TransUnion—by visiting annualcreditreport.com. The bureaus are required by law to give you a free report every 12 months. However, through the end of 2023, you may request your report weekly at no cost.

There are three reasons your student loan might have been wrongly placed in default and reported to the credit bureaus by mistake. Here’s how to begin the process to correct these errors:

1. If You Are Still in School

If you believe your loan was wrongly placed in default and you are attending school, contact your school’s registrar and ask for a record of your school attendance. Then call your loan servicer to ask about your record regarding school attendance.

If they have the incorrect information on file, provide your loan servicer with your records and request that your student loans be accurately reported to the credit bureaus.

2. If You Were Approved for Deferment or Forbearance

If you believe your loan was wrongly placed in default, but you were approved for (and were supposed to be in) a deferment or forbearance, there is a chance your loan servicer’s files aren’t up to date. You can contact the loan servicer and ask them to confirm the start and end dates of any deferments or forbearances that were applied to your account.

If the loan servicer doesn’t have the correct dates, provide documentation with the correct information and ask that your student loans be accurately reported to the credit bureaus. Under the Fair Credit Reporting Act, a borrower may appeal the accuracy and validity of the information reported to the credit bureau and reflected on their credit report.

Recommended: Student Loan Deferment vs Forbearance: What’s the Difference?

3. Inaccurate Reporting of Payments

If your loan has been reported as delinquent or in default to the credit bureaus, but you believe your payments are current, you can request a statement from your loan servicer that shows all the payments made on your student loan account, which you can compare against your bank records.

If some of your payments are missing from the statement provided by your loan servicer, you can provide proof of payment and request that your account be accurately reported to the credit reporting agencies.

Recommended: How to Build Credit Over Time

In all three cases, if you believe there is any type of error related to your student loan on your credit report, it’s best practice to also send a written copy of your dispute to the credit bureaus so they are aware that you have reported an error.

Why Your Student Loans Should Stay on Your Credit Report

You generally can’t have negative, but accurate, information removed from your credit report. However, you can dispute the student loans on your credit report if they are being reported incorrectly.

On the bright side, if you’re paying your student loans on time each month, that looks good on your credit report. It shows lenders that you are responsible and likely to pay loans back diligently.


💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

When You’re Having Problems Paying Your Student Loans

If you’re having difficulty making regular payments on your federal or private student loans, there are steps you can take before the consequences of defaulting kick in.

One option is to apply for student loan deferment, which allows you to reduce or pause your federal student loan payments for up to three years. During this time, interest on subsidized loans does not accrue. Or you could pursue student loan forbearance, which allows you to reduce or pause payments for up to a year if you’re facing a temporary financial hardship.

You can also contact your loan servicer to discuss adjusting your repayment plans.

Additionally, if you’re having trouble paying your student loans on time, you may be able to make your loans more affordable through a federal income-based repayment plan. These plans, including the new Saving on a Valuable Education (SAVE) plan, cap your payments at a small percentage of your discretionary income and extend the repayment term out to 20-25 years. Once the repayment period is up, any remaining balance is forgiven (though you may be subject to income taxes on the canceled amount).

Refinancing your student loans may also be an option—if you extend your term length, you may qualify for a lower monthly payment. Note that while these options provide short-term relief, they generally will result in paying more over the life of the loan.

When you start making your payments by the due date each month, you may see that your student loans can become a more positive part of your credit report. Again, while these options provide short-term relief, they generally will result in paying more over the life of the loan.

The Takeaway

While you generally can’t remove student loans from a credit report unless there are errors, it isn’t a bad thing if you make payments on time. If a loan is delinquent, it will be removed from your credit report after seven years, though you will still be responsible for paying back the loan.

If you’re having trouble making loan payments, there are ways to make repayment easier. Borrowers with federal student loans can look into forgiveness, an income-driven repayment plan, or a change to the loan’s terms.

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.

FAQ

Is it illegal to remove student loans from a credit report?

There’s no legal way to remove student loans from a credit report unless the information is incorrect. If you think there’s an error on your credit report, you can contact your loan servicer with documentation and ask them to provide accurate information to the credit reporting agencies. It’s also a good idea to send a copy of the dispute to the credit bureaus as well.

How do I get a student loan removed from my credit report?

If you paid your student loan off in full, it may still appear on your credit report for up to 10 years as evidence of your positive payment history. It takes seven years to have a defaulted student loan removed from a credit report. Keep in mind you are still responsible for paying off the defaulted loan and you won’t be able to secure another type of federal loan until you do.

How can I get rid of student loans legally?

If you have federal student loans, options such as federal forgiveness programs or income-driven repayment plans can help decrease the amount of your student loan that you need to pay back. If you have private or federal student loans, refinancing can help lower monthly payments by securing a lower interest rate and/or extending your loan term. If you refinance a federal loan, however, you will no longer have access to federal protections and benefits. And you may pay more interest over the life of the loan if you refinance with an extended term.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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For many people, personal loans can be the difference between affording something they need — like major home repairs — and having to forego the purchase. But personal loans aren’t without fees. Lenders always charge interest on loans, and in many cases, something called an origination fee.

But what is an origination fee on a personal loan, and how does it work? We’ll dive in below.

What Are Personal Loan Origination Fees?

Personal loan origination fees are an upfront, one-time charge by the lender that covers the costs of processing the loan, including the application, underwriting, and funding.

Typically, lenders charge origination fees as a percentage of the total loan amount. It’s usually 1% to 6%, but origination fees may go as high as 8% or even 10% of the loan amount. In some instances, a lender may charge a flat fee instead.

Not every personal loan has an origination fee, and lenders may differ in how they require consumers to pay it, if it’s included.

Recommended: Should I Get a $5,000 Personal Loan?

How Do Personal Loan Origination Fees Work?

If a lender charges an origination fee for a personal installment loan, it’s usually a percentage of the loan amount, somewhere between 1% on the low end and 10% on the high end. For example, if you take out a personal loan for $15,000 and there’s a 5% origination fee, you’ll pay $750 in fees.

Lenders typically subtract this fee from the total loan amount. In our example, that means they’d offer you a loan for $15,000, subtract $750 from the amount, and give you $14,250. But you’d still have to repay $15,000, plus interest. If you truly need the full $15,000, it’s a good idea to request more than $15K to ensure that you have enough funds after the origination fee is deducted.

In this case, the personal loan origination fee would be reflected in the APR calculation. That’s why experts often suggest comparing loans by their APRs. The APR, which represents the annual cost of a loan (not just the interest rate) will give you a true picture of what you’ll pay over the life of the loan.

Learn more about interest vs. APRs before comparing loans.

Note: While subtracting the fee from your loan amount is common, some lenders may require an out-of-pocket payment or add it to your loan total. Asking a lender how they charge the origination fee is a good idea when shopping for loans.

How Much Are Personal Loan Origination Fees Usually?

Personal loan origination fees typically vary between 1% and 10% of the total loan amount. Depending on how much you’re borrowing, this fee can get extraordinarily high.

For example, if you borrow $100,000 with an 8% origination fee, that’s an extra $8K you’re paying on top of the loan amount and interest.

Recommended: What to Know Before You Borrow Money Online

How Are Origination Fees Calculated?

Lenders may advertise a set origination fee or a percentage range. If it’s the latter, how exactly do they determine the percentage you’ll pay?

Unsurprisingly, lenders primarily consider your credit score and debt-to-income (DTI) ratio. The stronger your credit score and the lower your DTI ratio, the lower origination fees you might be offered. Lenders that don’t charge origination fees at all may have strict requirements that only borrowers with good or excellent credit can meet.

Lenders may also consider the length and size of the loan. Having a cosigner with good credit can help reduce your fees. In addition, lenders may ask your reason for borrowing or use other information from your application when setting your fees.

Recommended: Guide to Large Personal Loans

When Is an Origination Fee a Dealbreaker?

It’s wise to compare the loan APRs, which represent your total annual costs. A loan with no origination fee but a higher interest rate may wind up costing you more in the long run; comparing APRs can help you figure it out.

If you qualify for a handful of personal loans with varying fees, you may not necessarily want to go with the lowest fee. Compare APRs to discover the true cost of each loan.

At SoFi, we offer competitive personal loan interest rates and the option to pay an origination fee to secure a lower interest rate. An origination fee is not required, but it may cost you less in the long run, depending on your loan amount and term. We encourage everyone to do their due diligence and research multiple loans, but we’re proud of what we offer: same-day funding, flexible loan terms and amounts. You can even check your personal loan rate in as little as 60 seconds.

So when is a personal loan origination fee a dealbreaker? If the fee makes your total cost of borrowing higher than another offer, you should consider the better loan offer.

All lenders are required to disclose their fees as part of the Truth in Lending Act. If a lender advertises no origination fees, it’s a good idea to check the fine print to see if they’ve disguised the fee with a look-alike fee, like an “administrative” or “application” fee. If a lender does this and it gives you bad vibes, go with your gut — you should always feel good about the lender you choose.

Explore SoFi Personal Loan Rates

Looking for a personal loan with no required origination fee? Try a personal loan from SoFi. You can get same-day funding, and our loan terms and amounts are flexible (two to seven years and $5K to $100K in loans). Check your rate online in as little as 60 seconds!

Get a personal loan without the high fees from SoFi.

FAQ

How much are personal loan origination fees typically?

Personal loan origination fees typically range between 1% and 6% of the loan amount. But depending on the lender, your credit score, and other factors, you may pay as much as 8% or 10% in personal loan origination fees.

Do private loans always have origination fees?

Many private lenders charge origination fees, but that is not always the case. Before taking out any loan with a private lender, it’s a good idea to compare origination fees and APRs.

Can origination fees be negotiated?

You can often negotiate origination fees for certain types of loans, such as mortgages and personal loans. SoFi Personal Loans allow you to negotiate a fee in exchange for a lower interest rate.. However, with a high enough credit score, you may be able to qualify for a personal loan without an origination fee — or at least a lower one.

Photo credit: iStock/lechatnoir

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.

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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While short-term investing can be highly risky, investing for the long term is a time-honored way to manage certain market risks so you can reach important financial goals, like saving for college tuition and retirement.

That’s because when it comes to building a nest egg for these bigger life expenses, saving alone won’t necessarily get you where you need to go. You need the boost of investment returns over time to help your savings grow. That’s where long-term investing, also called buy-and-hold, comes in.

The chief advantage of a long-term investing strategy is that “time in the market beats timing the market,” as the saying goes. In other words, by sticking to an investment plan for the long term, your portfolio is more likely to weather its ups and downs, and fluctuations in different securities.

That said, long-term investing isn’t a risk-free endeavor, and there are also tax implications for holding investments long term. Knowing the ins and outs can make all the difference to your portfolio over time.

10 Tips for Long-Term Investing

So how do you go about establishing a long-term investment plan? These tips should help.

1. Set Goals and a Time Horizon

Your financial goals will largely determine whether or not long-term investing is the right choice for you. Spend time outlining what you want to achieve and how much money you’ll need to achieve it, whether that’s paying for college, retirement, or another big goal.

Once you’ve done that, you can think about your time horizon — when you’ll need the cash — which can help you determine what types of investments are suited to your goals.

For example, if you are saving to buy a car in a couple of years — generally a shorter-term goal — you may consider setting aside money in a savings account, CDs, or money market accounts, which are stable and can provide relatively quick access to your cash.

Stock market investing can be more appropriate for big goals in the distant future, such as saving for a child’s education or your own retirement, which could be 20 or 30 years down the line. This relatively long time horizon not only gives your investments a chance to grow, but it means that you also have the time to ride out market downturns that may occur along the way — which may translate to a better ROI (i.e. a higher return on investment), although there are no guarantees.

2. Determine Your Risk Tolerance

Your risk tolerance is essentially a measure of your ability to stomach volatile markets. It can help you determine the mix of investments that you will hold in your investment accounts — but your risk tolerance also depends on (or interacts with) your goals and time horizon.

Longer time horizons may allow you to take on more risk in some cases, because you’re not focused on quick gains. Which in turn means you might be more inclined to hold a greater proportion of stocks inside your portfolio.

How long should you hold stocks? Generally, holding stocks longer can be beneficial from a tax perspective, and from a risk perspective. The longer you stay invested, the longer you have to recover should markets take a dive.

Setting your risk tolerance also means knowing yourself. If you’re somebody who will be kept up at night when the market takes a downward turn, even if your goal is still 20 years away, then you may not want a portfolio that’s aggressively allocated to stocks. While there are no safe investments per se, it’s possible to have a more conservative allocation.

On the other hand, if short-term market volatility doesn’t bother you, an aggressive allocation may be the best fit to help you achieve your long-term goals.

3. Set an Appropriate Asset Allocation

Understanding your goals, time horizon, and risk tolerance can help give you an idea of the mix of assets — generally stocks, bonds, and cash equivalents — you may want to hold in your portfolio. For example, a portfolio might hold 70% stocks, 30% bonds, and no cash equivalents, depending on the investment opportunities you want to explore.

As a general rule of thumb, the longer your time horizon, the more stocks you may want to hold. That’s because stocks tend to be drivers of long-term growth (although they also come with higher levels of risk).

As you approach your goal, you’ll likely begin to shift some of your assets into fixed-income investments like bonds. The reason for this shift? As you approach your goal — the time when you’ll need your money — you’ll be more vulnerable to market downturns, and you won’t want to risk losing any of your cash.

For example, if the market experiences a big drop, you may be left without enough money to meet your goal. By gradually shifting your money to bonds, cash, or cash equivalents, you can help protect it from stock market swings, so by the time you need your cash, you have a more stable source of income to draw upon.

4. Diversifying Your Investment Portfolio

A key factor of any investing is that portfolio diversification matters. The idea is that holding many different types of assets reduces risk inside your portfolio in the long and short term. Imagine briefly that your portfolio consists of stock from only one company.

If that stock drops, your whole portfolio drops. However, if your portfolio contains stocks from 100 different companies, if one company does poorly, the effect on the rest of your portfolio will be relatively small.

A diverse portfolio contains many different asset classes, such as stocks, bonds, and cash equivalents as mentioned above. And within those asset classes a diverse portfolio holds many different types of assets across size, geographies and sectors, for example.

Different types of stocks

The basic principle behind diversification is that assets in a diverse portfolio are not perfectly correlated. In other words, they react differently to different market conditions.

Domestic stocks for example, might react differently than European stocks should U.S. markets start to struggle. Or investing in energy stocks will be different than tech-stock investing. So, if oil prices drop, energy sector stocks might take a hit, while tech might be less affected.

Many investors may choose to add diversification to their portfolios by using mutual funds, index funds, and exchange-traded funds, which themselves hold diverse baskets of assets.

Recommended: What Is an ETF?

5. Starting Investing Early

This tip may seem like a no-brainer, but increasing your time horizon gives you the opportunity to invest in riskier investments, like stocks, for longer. Though risky, stocks typically offer higher earning potential than other types of investments, such as bonds. Consider that the average stock market return annually is about 10%.

Second, the sooner you start investing, the sooner you are able to take advantage of compound growth, one of the most powerful tools in your investing toolkit. The idea here is that as your money grows, and you reinvest your returns, you steadily keep increasing the amount of money on which you earn returns.

As a result, your returns keep getting bigger and your investments can start to grow exponentially. This phenomenon can also help mitigate inevitable losses.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

6. Leaving Emotions Out of It

Investing is just numbers and math, so it’s totally rational, right? Well…not exactly. Humans are emotional creatures and sometimes those emotions can get the better of us, leading us to make decisions that aren’t always in our best interest. Letting emotions dictate our investing behavior can result in costly mistakes, as behavioral finance studies have shown.

For example, if you’re investing in a recession and the stock market starts to drop, you may panic and be tempted to sell your stocks. However, doing so can actually lock in your losses and means that you miss the subsequent rally.

On the other end of the spectrum, when the stock market is roaring, you may be tempted to jump on the bandwagon and overbuy stocks. Yet, doing so opens you up to the risk that you are jumping on a bubble that may soon burst.

There are a number of strategies that can help these mistakes be avoided. First, fight the urge to check how your investments are doing all the time. There are natural cycles of ups and downs that can happen even on a daily basis. These can cause anxiety if you pay attention too closely. You might want to avoid constant checking in and instead keep your eye on the big picture — achieving your long-term goals.

Trust your asset allocation. Remember that your asset mix has already taken your goals, time horizon, and your risk tolerance into consideration. Tinkering with it based on spur-of-the-moment decisions can throw off your allocation and make it difficult to achieve your goals.

7. Reducing Fees and Taxes

Be wary of taxes and fees as these can take a hefty bite out of your potential earnings over time. Also, many investment fees are expressed as a small percentage (e.g. less than 1% of the money you have invested) that may seem negligible — but it’s not.

Also, many investment costs can be hard to find, and thus hard to track. Meanwhile, various expenses can add up over time, reducing your overall gains.

Expense ratios

To cover the cost of management, mutual funds and exchange-traded funds charge an expense ratio — a percentage of the total assets invested in the fund each year. An actively managed mutual fund might charge 1.0% or more. A passively managed ETF or index fund may charge 0.50% or less. So you may want to choose mutual funds with the lowest expense ratios, or you may consider passive ETFs or index funds that charge very low fees.

The expense ratio is deducted directly from your returns. You may also encounter annual fees, custodian fees, and other expenses.

Advisory fees

You can also be charged fees for buying and selling assets as well as commissions that are paid to brokers and/or financial advisors for their services. It’s important to manage these costs as well. One of the best lines of defense is doing your research to understand what fees you will be charged and what your alternatives are.

8. Taking Advantage of Tax-Advantaged Accounts

There are a few long-term goals that the government wants you to save for, including higher education and retirement. As a result, the government offers special tax-advantaged accounts to help you achieve these goals.

Saving for Education

A 529 savings plan can help you save for your child’s — or anyone’s — college or grad school tuition. Contributions can be made to these accounts with after-tax dollars. This money can be invested inside the account where it grows tax-free. You can then make tax-free withdrawals to cover your child’s qualified education expenses.

Saving for Retirement

Your employer may offer you a 401(k) retirement account through your job. These accounts allow pre-tax dollars to be contributed, which lower your taxable income and can grow tax-deferred inside the account. If your employer offers matching funds, you could try to contribute enough to receive the maximum match. When you withdraw money from your 401(k) at age 59 ½, it is subject to income tax.

You may also take advantage of traditional IRAs and Roth IRAs. Traditional IRAs use pre-tax dollars and allow tax-deferred growth inside your account. Withdrawals at age 59 ½ are subject to income tax.

You fund Roth IRAs, on the other hand, with after-tax dollars, so money in your account grows tax-free, and withdrawals are not subject to income tax.

There are other tax-advantaged accounts that can work favorably for long-term investors, including SEP IRAs for self-employed people, and health savings accounts (or HSAs), in addition to other options.

9. Making Saving Automatic

One way to continually add to your investments is by making saving a regular activity. One easy way to do this is through automation. If you have a workplace retirement account, you can usually automate contributions through your employer.

Or if you’re saving in a brokerage account you can arrange with your broker for a fixed amount of money to be transferred to your brokerage account each month and invested according to your predetermined allocation.

Recommended: What Is a Brokerage Account? How Does it Work?

Automation can take the burden off of you to remember to invest. And with the money automatically flowing from your bank account to your investments accounts, you probably won’t be as tempted to spend it on other things.

10. Checking In on Your Investments

You may want to periodically check in on your portfolio to make sure your asset allocation is still on track. If it’s not, it may be time to rebalance your portfolio. You may want to rebalance when the proportion of any particular asset shifts by 5% or more.

This could occur, for example, if the stock market does really well over a given period, upping the portion of your portfolio taken up by stocks.

If this is the case, you might consider selling some stocks and purchasing bonds to bring your portfolio back in line with your goals. Periodic check-ins can also provide opportunities to examine fees and other costs (like taxes) and their impact on your portfolio.

What Is Long-Term Investing?

A long-term investment is an asset that’s expected to generate income or appreciate in value over a longer time period, typically five years or more. Long-term investments often gain value slowly, weathering short- to medium-term fluctuations in the market, and (ideally) coming out ahead over time.

Short-term investments are those that can be converted to cash in a few weeks or months — but they’re generally held for less than five years. Many investors trade these assets in short periods, like days, weeks, and months, to profit from short-term price movements.

However, a short-term investing strategy can be risky and volatile, resulting in losses in a short period.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Long-term Investments and Taxes

It’s also worth noting that for tax purposes the Internal Revenue Service (IRS) considers long-term investments to be investments held for more than a year. This is another important consideration when developing a longer-term strategy.

Investments sold after more than a year are subject to the long-term capital gains rate, which is equal to 0%, 15%, or 20%, depending on an investor’s income and the type of investment. The long-term capital gains rate is typically much lower than their income tax rate, which can help incentivize investors to hang on to their investments over the long run.

Recommended: Everything You Need to Know About Taxes on Investment Income

Why Is Long-Term Investing Important?

Long-term investing can be beneficial for the three reasons noted above:

•   Holding investments long term can allow certain securities to weather market fluctuations and, ideally, still see some gains over time. While there are no guarantees, and being a long-term investor doesn’t mean you’re immune to all risks, this strategy may help your portfolio recover from periods of volatility and continue to gain value.

•   In the case of bigger financial goals, e.g. saving for retirement or for college tuition, embracing a long-term investment plan may help your savings to grow and better enable you to reach those larger goals.

•   Last, there may be tax benefits to holding onto your investments for a longer period of time.

Recommended: Short- vs. Long-Term Investments

Investing With SoFi

The most important tips for long-term investing involve setting financial goals; understanding your time horizon and risk tolerance; diversifying your holdings; minimizing taxes and fees; and starting early so your portfolio can benefit from compounding; and understanding how tax-advantaged accounts can be part of a long-term plan.

When you’re ready to invest, whether through retirement accounts, brokerage accounts, by yourself, or with help, these strategies can help you build an investment plan to match your financial situation.

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).

FAQ

What is a realistic long-term investment return?

The average historical return of the U.S. stock market is about 10%, but that’s an average over about a century. Different years had higher or lower returns. So asking what a realistic long-term investment return is hard to gauge, and it will ultimately depend on the investments you choose, how long you hold them, as well as the fees and taxes you pay.

Where is the safest place to invest long-term?

All investments come with some degree of risk, but a more secure way to invest for the long term might be with fixed-income securities like bonds, which pay a set return over a period of time. Money market accounts and certificates of deposit (CDs) generally also have fixed rates. But remember that the lower the risk, the lower the return.

What is the biggest threat to long-term investments

Long-term investments, like all investments, are vulnerable to market changes. Even when investing for the long haul, it’s possible to lose money. Another threat is the risk of inflation. As inflation rises, your money doesn’t go as far. So even if you save and invest for decades, inflation is also rising at the same time, and your money may have less purchasing power than you expected.

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