InvestGen Archives | Page 55 of 65

Aug

2022

Institutional vs Retail Investors: What’s the Difference?

By Nina Semczuk | Growing Wealth, invest, Investing, Terminology | Comments Off

Much of the trading on Wall Street is done by institutional investors: companies or organizations that invest large sums of money on the behalf of other people. Retail, or individual investors, make up a smaller percentage of capital market investments.

In other words, the main difference between institutional vs. retail investors is size: The first category is dominated by professional financial institutions or large organizations that trade investments in large quantities (in a municipal pension fund, for example). Retail investors are made up largely of non-professional individuals (e.g. someone who trades on their own through a brokerage account).

While size and scale are two of the primary differences between institutional vs. retail investors, they each have their own advantages and disadvantages. Retail investors are afforded certain legal protections; institutional investors can have the upside in terms of research and access to capital.

Who Is Considered a Retail Investor?

Any non-professional individual buying and selling securities such as stocks or mutual funds and exchange traded funds (ETFs) — through an online or traditional brokerage or other type of account — is considered a retail investor.

The parent who invests in their child’s 529 college savings plan, or the employee who contributes to their 401(k) are both retail investors.

So in this case the term “retail” generally refers to an individual trading on their own behalf, not on behalf of a larger pool of investors. Retail here references the purchase and selling of investments in relatively small quantities.

Who Is Classified as an Institutional Investor?

By comparison, institutional investors make investment decisions on behalf of large pools of individual investors or shareholders. In general, institutional investors trade in large quantities, such as 10,000 shares or more at a time.

The professionals who do this large-scale type of investing typically have access to investments not available to retail investors (such as special classes of shares that come with different cost structures). By virtue of their being part of a larger institution, this type of investor usually has a larger pool of capital to buy, trade, and sell with.

Institutional investors are responsible for most of the trading that happens on the market. Examples of institutional investors include commercial banks, pension funds, mutual funds, hedge funds, endowments, insurance companies, and real estate investment trusts (REIT).

What Are the Differences Between Institutional Investors vs Retail Investors?

The main differences between institutional and retail investors include:

• Institutional investors invest on behalf of a large number of constituents (e.g. a municipal pension fund); retail investors are individuals who invest for themselves (e.g. an IRA).

• Size (large institutions vs. individuals) and scale of investments.

• Institutional investors typically have access to professional research and industry resources.

• Retail investors are protected by certain regulations that don’t apply to institutional investors.

Institutional Investors	Retail Investors
Professionals and large companies	Non-professional individuals
Invest in large quantities	Invest in small quantities
Invest on behalf of others	Invest for themselves
Access to industry-level sources, research	DIY
Access to preferred share classes and pricing	Access to retail shares and pricing

What Are the Similarities Between Institutional Investors vs Retail Investors?

There are very few similarities between institutional vs. retail investors except that both parties tend to seek returns while minimizing risk factors where possible.

Retail vs. Institutional Investor

Do Institutional or Retail Investors Get the Highest Returns?

There are no crystal balls on Wall Street, as they say, so there’s no guaranteed way to predict whether institutional investors always get higher returns vs. retail investors.

That said, some institutional investors may have the edge in that they have access to industry-level research as well as powerful technology and computer algorithms that enable them to make faster trades and more profitable calculations.

Does that mean institutional investors always come out ahead? In fact, retail investors who have a longer horizon also have a chance at substantial returns over time, although there are no guarantees on either side.

How Many Retail Investors Are There?

In the U.S., it’s fairly common to be a retail investor. About 58% of Americans say they own stock, according to a 2022 Gallup poll, meaning they own individual stocks, stock mutual funds, or they hold stock in a self-directed 401(k) or IRA.

Examples of retail investors include people who manage their retirement accounts online (e.g., an IRA) and those who trade stocks as a hobby.

Because individual investors are generally thought to be more prone to emotional behavior than their professional counterparts (and typically don’t have access to the resources and research of larger institutions), they may be exposed to higher levels of risk. Thus the Security Exchange Commission (SEC) provides certain protections to retail investors.

For example, the 2019 Regulation Best Interest rule states that broker-dealers are required to act in the best interest of a retail customer when making a recommendation of a securities transaction or investment strategy. This federal rule is intended to ensure that broker-dealers aren’t allowed to prioritize their own financial interests at the expense of the customer.

Another protection provided to retail investors is that investment advisors and broker-dealers must provide a relationship summary that covers services, fees, costs, conflicts of interest, legal standards of conduct, and more to new clients.

Types of Institutional Investors

The most common institutional investors are listed below.

1. Commercial Banks

Commercial banks are the “main street” banks many people are familiar with, such as Wells Fargo, Citibank, JP Morgan Chase, Bank of America, TD Bank, and countless others. Along with providing retail banking services, such as savings accounts and checking accounts, large banks are also institutional investors.

These large corporations have entire teams dedicated to investing in different markets: e.g. global markets, bond markets, socially responsible investing, and so on.

2. Endowment Funds

Typically connected with universities and higher education, endowment funds are often created to help sustain these nonprofit organizations. Churches, hospitals, nonprofits, and universities generally have endowment funds, whose funds often derive from donations.

Endowment funds generally come with certain restrictions, and have an investment policy that dictates an investment strategy for the manager to follow. This might include stipulations about how aggressive to be when trying to meet return goals, and what types of investments are allowed (some endowment funds avoid controversial holdings like alcohol, firearms, tobacco, and so on).

Another component is how withdrawals work; often, the principal amount invested stays intact while investment income is used for operational or new constructions.

3. Pension Funds

Pension funds generally come in two flavors:

• Defined contribution plans, such as 401(k)s or 403(b)s, where employees contribute what they can to these tax-deferred accounts.

• Defined benefit plans, or pensions, where retirees get a fixed income amount, regardless of how the fund does.

Employers that offer defined benefit pensions are becoming less common in the U.S. Where they do exist, they’re often linked to labor unions or the public sector: e.g. a teachers union or auto workers union may offer a pension.

Public pension funds follow the laws defined by state constitutions. Private pension plans are subject to the Employee Retirement Income Security Act of 1974 (ERISA); this act defines the legal rights of plan participants.

As for how a pension invests, it depends. ERISA does not define how private plans must invest, other than requiring that the plan sponsors must be fiduciaries, meaning they put the financial interest of the account holders first.

4. Mutual Funds

As defined by the Securities and Exchange Committee (SEC), mutual funds are companies that pool money from many investors and invest in securities such as bonds, stocks, and short-term debt. Mutual funds are thus considered institutional investors, and are known for offering diversification, professional management, affordability, and liquidity.

Typical mutual fund offerings include money market funds, bond funds, stock funds, index funds, actively managed funds, and target date funds.

The last category here is often designed for retail investors who are planning for retirement. The asset mix of these target date funds, sometimes known as target funds or lifecycle funds, shifts over time to become more conservative as the investor’s target retirement date approaches.

5. Hedge Funds

Like mutual funds, hedge funds pool money from investors and place it into securities and other investments. The difference between these two types of funds is that hedge funds are considered private equity funds, are considered high risk vehicles, and aren’t as regulated as mutual funds.

Because hedge funds use strategies and investments that chase higher returns, they also carry a greater risk of losses — similar to high-risk stocks. In general, hedge funds also have higher fees and higher minimum investment requirements. So, they tend to be more popular with wealthier investors and other institutional investors. (In some cases, they’re only available to accredited investors).

6. Insurance Companies

Perhaps surprisingly, insurance companies can also be institutional investors. They might offer products such as various types of annuities (fixed, variable, indexed), as well as other life insurance products which are invested on behalf of the investor, e.g. whole life or universal life insurance policies.

Getting Started as a Retail Investor

Institutional investors may be larger, more powerful, and run by professionals — whereas retail investors are individuals who aren’t trained investment experts — but it’s important to remember that these two camps can and do overlap. Institutional investors that run pension funds, mutual funds, and insurance companies, for example, serve retail investors by investing their money for retirement and other long-term goals.

If you’re ready to start investing as a retail investor, it’s easy when you set up an online brokerage account with SoFi Invest.

You can invest in stocks, ETFs, IPO shares, fractional shares, and more. For folks who’d like to discuss their financial goals or questions, SoFi members can connect at no cost with financial advisors.

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 are the different types of investors?

Institutional investors are big companies with teams of professional investment managers who invest other people’s money. Retail investors are individuals who typically manage their own investment (e.g. for retirement or college savings).

What percentage of the stock market is made up of institutional investors?

The vast majority of stock market investors are institutional investors. Because they trade on a bigger scale than retail investors, institutional trades can impact the markets.

Are institutional or retail investment strategies better?

Institutional investors have access to more research and technology compared with retail investors. Thus their strategies may be considered more sophisticated. But it’s hard to compare outcomes, as both groups are exposed to different levels of risk.

SoFi Invest®

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

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

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

SOIN0822022

Aug

2022

Guide to Writing Put Options

By Mike Zaccardi, CMT, CFA | Growing Wealth, invest, Investing | Comments Off

Puts, or put options, are contracts between a buyer – known as the holder of an option – and a seller – known as the writer of an option – that gives the buyer the right to sell an asset, like a stock or exchange-traded fund (ETF), at a specific price within a specified time period. The seller of the put option is obligated to buy the asset at the strike price if the buyer exercises their option to sell.

Writing a put option is also known as selling a put option. When you sell a put option, you agree to buy the underlying asset at a specified price if the option buyer, also known as the option holder, exercises their right to sell the asset. The premium you receive for writing the put option is your maximum possible profit.

Generally, traders who buy put options have a bearish view of a security, meaning they expect the underlying asset’s price to decline. In contrast, the put option writer has a neutral to bullish outlook of a security. The put writer should be willing to take the risk of having to buy the asset if it falls below the strike price in exchange for the premium paid by the put option holder.

Writing put options is just one of numerous trading strategies investors use to build wealth, speculate, or hedge positions. While there is potential to generate income by writing put options, it can also be a risky way to enhance a portfolio’s return. Only investors with the knowledge of how to write put options and risk tolerance to take on this strategy should do so.

Writing Put Options

When writing a put option contract, the seller will initiate a trade order known as sell to open.

As mentioned above, the put option writer is selling a contract that gives the holder the right to sell a security at a strike price within a specified time frame. The put option writer will receive a premium from the holder for selling this option. If the price of the security falls below the strike price before the expiration date, the writer may be obligated to buy the security from the holder at the strike price.

There are two main reasons to write a put option contract: to earn income from the premium or to hedge a position.

A naked, or “uncovered,” put option is an option that is issued and sold without the writer setting aside any cash to meet the obligation of the option when it reaches expiration. This increases the writer’s risk.

Maximum Profit/Loss

The most a put option writer can profit from selling the option is the premium received at the start of the trade. Many traders take advantage of this profit as a way to generate regular income by writing put options for assets that they expect will not fall below the strike price.

However, this strategy can be risky because there can be significant losses if the asset’s price falls below the strike price. For example, if a stock’s price plummets because a company announces bankruptcy, the put option writer may be obligated to buy the stock when it’s trading near $0. The maximum loss will be equal to the strike price minus the premium.

Breakeven

The breakeven point for a put option writer can be calculated by subtracting the premium from the strike price. The breakeven point is the market price where the option writer comes away even, not making a profit or experiencing a loss (not including trading commissions and fees).

Writing Puts for Income

There are many options trading strategies. As noted above, many traders will write put options to generate income when they have a neutral to bullish outlook on a specific security. Because the writer of a put option receives a premium for opening the contract, they will benefit from that guaranteed payment if the put expires unexercised or if the writer closes out their position by buying back the same put option.

For example, if you believe an asset’s price will stay above a put option’s strike price, you can write a put option to take advantage of steady to rising prices on the underlying security. By keeping the option premium, you effectively add a stream of income into your trading account, as long as the underlying asset’s price moves in your favor.

However, with this strategy, you face the risk of having to buy the underlying asset from the option holder if the price falls below the strike price before the expiration date.

💡 Recommended: How to Sell Options for Premium

Put Writing Example

Let’s say you are neutral to bullish on shares of XYZ stock, which trade at $70 per share. You execute a sell to open order on a put option expiring in three months at a strike price of $60. The premium for this put option is $5; since each option contract is for 100 shares, you collect $500 in income.

If you wrote the put option contract for income, you’re hoping the price of XYZ stock will stay above $60 through the expiration date in three months, so the option holder does not exercise the option and requires you to buy XYZ. In this ideal scenario, your maximum profit will be the $500 premium you received for selling the put option.

At the very least, you hope the stock does not fall below $55, or the breakeven point ($60 strike price minus the $5 premium). At $55, you may be obligated to buy 100 shares at the $60 strike price:

$5,500 market value – $6,000 price paid + $500 premium earned = $0 return

If XYZ stock falls to $50, the put option holder will likely exercise the option to sell the stock. In this scenario, you will be obligated to buy the stock XYZ at the $60 strike price and incur a $500 loss in this trade:

$5,000 market value – $6,000 price paid + $500 premium earned = -$500 return

However, the further the price of XYZ falls, your potential loss risk increases. In the worst-case scenario where the stock falls to $0, your maximum loss would be $5,500:

$0 market value – $6,000 price paid + $500 premium earned = -$5,500 return

Put Option Exit Strategy

In the example above, it is assumed that the option is exercised or expires worthless. However, a put option writer can also exit a trade in order to profit or mitigate losses prior to the contract’s expiration.

A put writer can exit their position anytime using a trade order known as buy to close. In this scenario, the writer of the initial put option will buy back a put option to close out a position, either to lock in a profit or prevent further losses.

Using the example above, say that after two months, shares of XYZ have increased from $70 to $85. The value put contract you sold, which still has one more month until expiration and a $60 strike price, has collapsed to $1 because of a share price rise and perhaps a drop in expected volatility. Rather than wait for expiration, you decide to buy to close your put position, buying back the put contract at $1 premium, for a total of $100 ($1 premium x 100 shares). You are no longer obligated to buy shares of XYZ in the event the stock drops below $60 during the next month, and you lock in a profit of $400:

$500 premium earned to sell to open – $100 premium paid to buy to close = $400 return

A buy to close strategy can also be used to mitigate substantial losses. For example, if stock XYZ’s price starts dropping, the value of puts with a $60 strike price and a similar expiration date will rise. Rather than wait for expiration and be obligated to buy shares of a stock you don’t want, potentially losing up to $5,500, you may exit the position at any time. If option premiums for this trade are now $8, you can pay $800 ($8 premium x 100 shares) to buy to close the trade. This will result in a loss of $300, a potentially more manageable loss than the worst-case scenario:

$500 premium earned to sell to open – $800 premium paid to buy to close = -$300 return

Finally, user-friendly options trading is here.^*

Trade options with SoFi Invest on an easy-to-use, intuitively designed online platform.

*Check out the OCC Options Disclosure Document.

The Takeaway

Writing a put option is an options strategy in which you are neutral to bullish on the underlying asset. Potential profit is limited to the premium collected at the start of the trade. The maximum loss can be substantial, however. Finally, there is the risk that you will be liable to buy the stock at the option strike price if the holder exercises the option. Because of all these moving parts, writing put options should be left to experienced traders with the tolerance to take on the risk.

Looking to try different investment opportunities? SoFi’s intuitive and approachable options trading platform is a great place to start. You can access educational resources about options for more information and insights. Plus, you have the option of placing trades from either the mobile app or web platform.

Trade options with low fees through SoFi.

FAQ

What happens when you sell a put option?

Selling a put option is the same thing as writing a put option. You profit by collecting a premium for selling the option or when the put options decline in value, which usually happens when the underlying asset price rises. A significant risk of writing a put option is that you might be required to buy shares of the underlying asset at the strike price.

How would you write a put option?

You write a put option by first executing a sell to open order. You collect a premium at the onset of the trade without owning shares of the underlying asset. This strategy can be risky, so it generally requires high-level options trading knowledge.

When would you write a put option?

If a trader believes an asset’s price will stay flat or increase over a period of time, they may choose to write a put option. If the underlying asset’s price increases, the put option’s value will decline as it nears expiration. A profitable outcome occurs when the value of the put option is zero by expiration, or if the put writer buys to close the position before expiration. The put writer will profit by keeping the premium received at the initiation of the trade.

Photo credit: iStock/insta_photos

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

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

*Borrow at 12%. 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.
SOIN0422030

Aug

2022

9 ESG Metrics Investors Should Know

By Kenny Zhu | Growing Wealth, invest, Investing | Comments Off

There are over half a dozen institutions and nonprofits involved in establishing metrics, providing disclosure guidelines, and constructing surveys in the name of establishing ESG metrics. ESG refers to companies that try to meet higher environmental, social, and governance standards, as well as securities based on those organizations.

Given the growing interest in sustainable investing, and new research that suggests these strategies can be as profitable as conventional investing, investors will benefit from the ability to measure and compare outcomes.

That said, the SEC only recently took steps to propose ESG-disclosure requirements for investment advisors and fund managers, and these have yet to be implemented. As such, there’s currently wide variance in disclosure practices as the industry continues to consolidate.

Those interested in learning more about ESG investing and the standards currently in use, should be ready for a throng of different metrics that can vary widely across industries. We cover nine of the most common below.

What Are ESG Metrics?

While ESG investing actually began in the 1960’s, the investment philosophy didn’t really catch on in the mainstream until the past couple of decades, with the increase in popularity of socially responsible investing (SRI). Socially responsible investing is a broader term in the industry, and can be used interchangeably with ESG, although the two are different.

As noted above, ESG stands for environmental, social, and governance factors, each of which represents a set of standards that can be used to measure the risks and sustainability of a business. Each factor features its own set of qualitative and quantitative metrics on how firms perform in terms of environmental responsibility, social wellness, and corporate governance.

As it stands, two of the most prominent organizations that set disclosure standards for ESG metrics include the Global Reporting Initiative (GRI) and the Value Reporting Initiative (VRI), which is a merger of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC).

While there is much overlap amongst the existing standards for ESG, at their core, each organization seeks to establish a framework that 1) allows firms to accurately represent their ESG metrics, and 2) allows those metrics to be comparable across firms.

The Importance of ESG Metrics

ESG metrics are important because they allow investors to fairly gauge a firm’s impact on environmental issues, societal issues, and issues of corporate responsibility against a set of comparable peers. Since many investors who are interested in ESG strategies are also committed to making an impact with their money, being able to measure outcomes is important.

In theory, companies that perform well in ESG categories have lower costs of capital, are more innovative, and may help to support positive environmental, social, and corporate governance outcomes. However, it can be difficult to properly measure ESG policies across companies, as no official regulations for standardized ESG reporting currently exist.

Still, two recent studies suggest that socially responsible funds tend to outperform conventional mutual funds. The Morningstar “Sustainable Funds U.S. Landscape Report” from February 2022 found that “two-thirds of sustainable offerings in the large-blend category topped the U.S. market index last year compared with 54% of all funds in the category.”

Also, a Morningstar analysis of European-based funds found that the majority of ESG funds outperformed non-ESG strategies over one-, five-, and 10-year periods.

Investors also face difficulty when comparing ESG metrics across different industries. For example, it’s difficult to compare energy companies and financial institutions on emissions-related issues, as the two represent entirely different industries. This can easily lead to apples-to-oranges comparisons, if not monitored closely.

Finally, some of these standards are qualitative and may be prone to subjectivity, which can make the ESG evaluation process difficult to quantify. These can all present challenges if you’re trying to apply ESG principles to your investing strategy. It’s therefore important to identify an appropriate widely accepted set of ESG metrics to ensure that investors evaluate investments using the right framework.

9 Common ESG Metrics Businesses Track

Commonly employed ESG metrics are varied and consist of both qualitative and quantitative metrics across all three sub-categories of environmental, social, and governance.

We break down some of the most commonly tracked ESG factors in the industry, organized by category.

3 Common Environmental Metrics

Environmental metrics measure the long-term ecological sustainability of a firm’s actions. These can be related to emissions, finite natural resources, and the environment, among other things.

Many of these metrics can be tracked on an aggregate basis or relative to another operating metrics (per capita, per unit produced, etc).

• Emissions: Quantifies how much a firm emits in greenhouse gases, or is working to reduce carbon emissions, through its operations.

• Waste: Measures how much waste a company generates or recycles in their operations. Can also deal with a company’s impact on its surrounding ecology.

• Resource Usage: Tracks the efficiency and intensity of a firm’s operations when it comes to using energy, water, or other key resources.

3 Common Social Metrics

Social metrics evaluate how a firm’s policies impact its human capital and society at large. Attempts to quantify these metrics have largely been implemented on a per-occurrence basis or as a rate over time.

• Human resources: Evaluates how a company treats its workforce, frequency/magnitude of any workplace litigation, and employee turnover.

• Labor safety: Tracks a firm’s commitment to safe labor practices via metrics like frequency of workplace accidents and lost productivity.

• Products: Examines a firm’s product quality and sustainability through metrics like number of recalls, complaints, or even frequency of litigation. Can also be linked to environmental when it comes to how product inputs are sourced.

3 Common Governance Metrics

Governance metrics pertain to issues relating to business ethics, mitigation of agency risks, and reporting transparency. These can be measured in terms of how executives are compensated, board policies, and accounting choices, among others.

• Ownership Structure: Reviews how faithful a firm is to its shareholders when it comes to metrics like the number of independent directors on the board, or how voting rights are distributed between management and shareholders.

• Executive Compensation: Measures executive compensation relative to industry standards or company profitability. Can also be tied to social when measuring how compensation structures vary for different genders/minorities.

• Financial Reporting: Tracks a firm’s accounting policies and how comprehensive and accurate they are. Could involve reviewing a firm’s books for key disclosures or frequency of one-off exceptions.

How Can Investors Use ESG Metrics?

Investors will want to adopt a long-term perspective when it comes to evaluating investments using ESG metrics, as the principles of ESG are built off the basis of long-term secular trends when it comes to technology and social issues. The goal is to invest in companies with positive ESG traits while avoiding or underweighting firms with negative ESG traits.

Investors will want to be discerning when investing in specific firms or funds that advertise an ESG approach. The wide range of ESG frameworks mean that some firms may cherry-pick which ESG metrics they wish to disclose. Investment funds and exchange-traded funds (ETFs) that tout an ESG-based approach may use their own proprietary metrics when deciding how to allocate ESG investments; which may make them difficult to compare.

When using ESG metrics, you’ll want to examine all ESG-related disclosures closely and ensure that there’s consistency in the data being reported. Depending on the metric you’re examining, you may wish to avoid making comparisons across disparate industries and focus on identifying “best-in-class” investments for a single industry.

How do Firms Report ESG Metrics?

How each firm reports its ESG metrics depends on its policies regarding disclosures.

When it comes to policy implementation, firms often set ESG targets to meet or exceed guidelines set by governments, non-profits, or agencies; they may survey their own stakeholders and shareholders to gauge how they view company performance on ESG issues, or hire third parties to survey their customer base on their behalf.

Keep in mind, the adoption of ESG frameworks can vary widely by firm and disclosure of these metrics is still voluntary. Additionally, certain metrics may be difficult to quantify and in some cases, management, stakeholders, or shareholders may disagree on the impact of certain ESG factors.

As a result, professional money managers sometimes may solicit the assistance of third-party ESG consultants to obtain an independent assessment of how a company actually performs on ESG metrics.

The Takeaway

When used properly, ESG metrics offer another useful dimension for evaluating investments, as it focuses on a unique set of risk factors for firms that typically isn’t captured by using traditional fundamental metrics.

However, the adoption of a unifying set of standards among firms still remains elusive, and will likely remain so until regulators choose to codify their own ESG reporting requirements.
As with any investment strategy, investors will want to manage their expectations appropriately and employ ESG metrics as part of a larger toolbox for investment analysis.

Ready to explore sustainable investing — or add ESG-focused investments to your portfolio? It’s easy when you open an Active Invest account with SoFi Invest. SoFi’s investing platform offers commission-free trades on stocks and ETFs, as well as fractional shares, IPO shares, and more.

Photo credit: iStock/shapecharge

SoFi Invest®

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

Aug

2022

Guide to Buying Stocks With a Credit Card

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

It is (sometimes) possible to buy stocks with a credit card, but it’s rarely a good idea for most people. Most brokerages do not allow you to directly fund your account with a credit card, and even if you find a brokerage that does, the fees associated with buying stocks with a credit card can outweigh any advantages.

Before you buy stocks with a credit card, make sure you understand the risks as well as the benefits. Investing in the stock market always comes with a degree of risk. If your investments lose money, you may not be able to pay off your credit card statement, which will mean that you’ll have to pay additional interest.

Using Your Credit Card to Buy Stocks

Most brokerages do not allow you to use your credit card to buy stocks. For example, SoFi’s online trading platform does not permit you to fund your account with a credit card. Brokerages generally don’t allow you to buy stocks with a credit card to help comply with the federal regulations governing financial products, such as stocks.

However, while you can’t purchase stocks directly with a credit card, there are still ways you can use your credit card to fund your purchase of stocks. This includes using cash back rewards to fund investments as well as taking out cash advances. Another option is to use a credit card that allows you to transfer funds to a checking account, which you can then move over to your brokerage account.

Benefits of Buying Stocks With a Credit Card

You generally aren’t able to buy shares of stock with a credit card, and even if you find a workaround to do so, the risks mostly outweigh the potential benefits.

Perhaps the main benefit if you’re investing with credit card rewards is that it can offer a way to put the rewards you get from your everyday purchases toward your financial future. While there’s no guarantee of success in investing, it’s possible the rewards points or cash you invest could grow in the stock market.

Risks of Buying Stocks With a Credit Card

Just like buying crypto with a credit card, buying stocks with a credit card comes with considerable risk. If you attempt to do so, take note of the following potential downsides:

• Investments in the stock market may lose value. If this happens, you may have a hard time paying off your monthly credit card statement in full.

• There are fees associated with buying stocks with a credit card. If you can find a brokerage that allows the purchase of stocks with a credit card, you’ll generally pay a fee to do so. Additionally, if you opt for a cash advance to use to buy stocks, you’ll also run into fees, not to mention a higher interest rate. There’s always a chance your investment returns won’t offset these costs.

• High credit utilization could affect your credit score. Making stock purchases with your credit card, taking out sizable cash advances, or racking up spending in order to earn rewards could all drive up your credit utilization, a major factor in determining your credit score. Having a high credit utilization — meaning the percentage of your total credit you’re using — could cause your credit score drop.

• You could get scammed. If you’re getting offers to buy certain shares with your credit card, there’s a chance it’s a scam. Do your own research before making any moves, and be wary before providing any personal information.

Recommended: Can You Buy Crypto With a Credit Card

Factors to Consider Before Buying Stocks With a Credit Card

There are a variety of different factors that you should keep in mind before buying stocks with a credit card.

Investment Fees

If you do find a brokerage that allows you to buy stocks with a credit card, they will likely charge a credit card convenience fee. This fee, which helps the brokerage to offset their costs for credit card processing, usually runs around 3% of the total price of your investment. Starting 3% in the hole makes it very difficult to make profitable investments.

Recommended: What is a Charge Card

Cash Advance Fees

If your brokerage does not support buying stocks with a credit card, you might consider taking out a cash advance from your credit card. Then, you could use the cash to fund your brokerage account.

However, this transfer will often involve a cash advance fee, which typically will run anywhere from 3% to 5% of the amount transferred. Additionally, interest on cash advances starts to accrue immediately, which is different than how credit cards work usually, and often at a higher rate than the standard purchase APR.

Transfer Fees

Another way to use your credit card to purchase stocks is by making a balance transfer. You can transfer funds from your credit card to your checking account, and then move that money again to your brokerage account. In addition to the hassle of moving money around, you’ll likely pay a balance transfer fee, which is often 3% or 5%. Plus, interest will start accruing on balance transfers right away unless you have a 0% APR introductory offer.

Interest

If you’re not able to pay your credit card statement in full (because your investments have decreased in value), your credit card company will charge you interest. With many credit card interest rates often approaching or even exceeding 20% APR, this will very likely swallow up any profits from your short-term investments.

You’ll also want to look out for interest getting charged at a higher rate and starting to accrue immediately if you opt for a cash advance or a balance transfer.

Recommended: How to Avoid Interest On a Credit Card

Avoiding Scams When Buying Stocks With a Credit Card

Because most reputable brokerages don’t allow you to buy stocks with a credit card, there are occasionally scams that you need to be on the lookout for.

Watch out for individuals or lesser-known companies that say you can buy stocks with a credit card through them. Do your own research to make sure it is a legitimate brokerage and offer before using these other companies.

Does Buying Stock With Your Credit Card Affect Your Credit Score?

The act of just buying stock with your credit card won’t affect your credit score any more than any other purchase on a credit card. However, your credit score might be affected if you aren’t able to pay your monthly balance off in full. One of the best ways to improve your credit score is to always make sure that you have the financial ability and discipline to pay off your credit card statement in full, each and every month.

Additionally, your credit score could take a hit if you use too much of your available balance or even max out your credit card with your stock purchases, as this would increase your credit utilization. Also, you might see an impact on your credit if you open a new account to fund your stock purchases. This is because credit card applications trigger a hard inquiry, which will temporarily cause a dip in your score.

Alternatives to Buying Stocks With a Credit Card

As you can see, buying stocks with a credit card generally isn’t a great option — or even possible with most brokerages. If you want to start investing in stocks, you might consider these other ways to do so:

• Cash back rewards: Then, you can take your cash back rewards that you earn and use them to invest in stocks or other investments.

• Employer-sponsored 401(k): A great way to invest is through an employer-sponsored retirement plan like a 401(k). By using a 401(k), you’ll get to invest with pre-tax dollars and defer paying taxes until you make withdrawals in retirement.

• Brokerage margin loans: If you’re looking to borrow money to invest, one option could be a brokerage margin loan. These allow you to borrow money directly from the brokerage, often at a lower rate than what’s offered by most credit cards. Be aware of the risk involved here though — even if your investments don’t pan out, you’ll still have to repay your loan.

The Takeaway

Very few (if any) brokerages allow you to directly buy stocks with a credit card. If you do find a brokerage that allows you to buy stocks with a credit card, note the fees involved, not to mention the risk of loss in investing and the possibility of damaging your credit score. This is why even if you do find a way to do it, it’s rarely a good idea to buy stocks with a credit card for most people.

One alternative is to get a cash back rewards credit card and then use rewards you earn to fund your stock investments.

FAQ

What is credit card arbitrage?

Credit card arbitrage is usually defined as borrowing money at a low interest rate using a credit card and then investing that money, hoping to earn a higher return on investment. This is often done with cards that offer 0% introductory APRs.

What are the risks of credit card arbitrage?

The biggest risk of credit card arbitrage is that your investments will lose money, or they won’t make enough money to repay your credit card balance. This can cost you a significant amount of interest and/or credit card fees. You should also be aware that having a large balance on your credit card (even if it’s at 0% interest) can have a negative effect on your credit score.

Does buying stock with a credit card affect my tax?

Buying and selling stocks does often come with tax consequences, and you should be aware of how your investments affect your tax liability. How you buy stocks (with cash, credit card ,or in other ways) doesn’t affect the amount of taxes you might owe on your stock purchase.

Should I buy stocks with my credit card?

The way that credit cards work is that you borrow money and, if you don’t pay the full amount each month, you’re charged interest. Some brokerages may also charge credit card processing or convenience fees if they allow you to purchase stocks with a credit card. Because of the interest and fees potentially involved, it’s very difficult to come out ahead buying stocks with a credit card. Plus, there’s no guarantee of success when investing.

Is it safe to buy stocks with a credit card?

Because most reputable stockbrokers do not accept credit card payments to fund your account or buy stocks, you’ll want to be careful with any site that says that it will let you buy stocks with a credit card. Follow best practices for internet safety when trying to buy stocks with a credit card, just like you would before making any purchase online.

Do stockbrokers accept credit card payments?

Most stockbrokers do not accept credit card payments to fund your account or to buy stocks. If you want to buy stocks with a credit card, you will need to find a workaround such as taking a cash advance from your credit card and using that to fund your brokerage account. Just be sure that you understand any cash advance fees and the interest rate that come with that type of financial transaction.

Photo credit: iStock/katleho Seisa

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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

Disclaimer: 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 .

SOCC0622007

Jul

2022

Investing for Beginners: Considerations and Ways to Get Started

By Michael Flannelly | Growing Wealth, Investing | No Comments

Investing can be a great way to secure your financial future, but it can also be an intimidating minefield for the uninitiated. Fortunately, modern technology has made it easier to start an investment portfolio. You could get started today if you have an internet connection and a bank account.

It’s worth understanding what you’re doing before you put your money into the nebulous financial markets. You’ll want to know the basics of investing, from the different types of investments to the various strategies you can make money from them. With this knowledge, you should have a good idea of what sorts of investments are right for you and how to get started.

Table of Contents

Why Is Investing Important?
Things to Consider as a Beginner Investor
How to Start Investing
4 Types of Investments for Beginners
Investment Strategies for Beginners
When Should You Start Investing?
How Much Money Do You Need to Start Investing as a Beginner?
FAQ

Why Is Investing Important?

Investing is important because it helps you build wealth. Investing is simply the process of putting your money into assets that have the potential to grow in value over time. Doing this may increase your wealth and achieve financial goals, like saving for retirement.

You may wonder why you’d want to risk putting your hard-earned money in the financial markets, where it has the chance to decline, rather than simply stashing it in a savings account or even under your mattress. It’s because inflation can eat away at your money’s purchasing power if you don’t invest.

Your money sitting in a savings account earning little interest will eventually decrease in value because of inflation. The money you put into the market may be at risk, but it also has the potential to grow. By investing, you can ensure your money keeps up with inflation or even outpaces it. And historically, the market tends to increase, even accounting for significant stock market crashes like the Great Depression and the 2008 crisis.

💡 Recommended: How to Protect Your Money From Inflation

Of course, that doesn’t mean there’s no place for a healthy savings account, especially for money that you need in the short term.

Many people hold off putting money into the financial markets because they believe common investment myths, like that you have to be an expert or that you need to devote a lot of time to your finances. But even novices can set aside a little time and money to start investing.

Things to Consider as a Beginner Investor

There are a few important pieces of information you want to determine and understand before you begin investing.

Investment Goals

You want to establish your financial goals before you start investing. Since investments have such strong growth potential over time, many people use their portfolio’s gains to fund future financial goals, like purchasing a home or retirement. Figuring out which investment strategy is right for you starts by assessing and understanding your goals, because they’re not the same for everyone.

Time Frame

After establishing your investing goals, you can think about how long it may take you to reach them. For example, investing for your retirement nest egg will likely take longer than investing to save money for a downpayment on a house.

Determining these time horizons for investing involves taking your age into account. A younger investor saving for retirement has a longer runway to achieve their goals and, thus, can take more risks, like investing in stocks or cryptocurrencies, to meet those goals. In contrast, an older investor will likely employ a conservative investment strategy, like investing in low-risk bond funds, to protect their portfolio’s value from declining at a time when they are less able to afford it.

Risk Tolerance

Every investor must determine the amount of investment risk they are willing and able to accept in their investing decisions. This risk tolerance is essentially the loss an investor can withstand in their portfolio. Age, investing goals, and income may contribute to your risk tolerance.

Certain assets, like growth stocks, commodities, and cryptocurrencies, are risky investments, while bonds and blue chip stocks are considered less risky. With increased risk comes the potential for higher returns, albeit with the possibility of significant losses.

Portfolio Diversification

Portfolio diversification involves investing your money across a range of assets, like stocks, bonds, and real estate, rather than concentrating all of it in one area. After all, you don’t want to put all your financial eggs in one basket. By diversifying the assets in your portfolio, you may offset a certain amount of investment risk and thereby improve returns.

How to Start Investing

If you are ready to start investing and want to build a portfolio on your own, you can follow these steps:

Step 1: Open an Investment Account

You will need to open a brokerage account and deposit money into it. Once your account is funded, you can buy and sell stocks, mutual funds, and other securities.

You can also utilize an employer-sponsored retirement plan, like a 401(k), or an individual retirement account to make your investments. One benefit of retirement investment accounts is that they are tax-advantaged, meaning your investments can grow tax-free within the accounts. However, you may have to pay taxes when withdrawing money from the account.

💡 Need more help? Follow our guide on how to open a brokerage account.

Step 2: Do Your Research

It’s important to research different companies, funds, and assets to find a diversified selection of investments that fit your desires and priorities. Diversification will help to reduce your risk and maximize your returns.

Step 3: Invest and Monitor Your Portfolio

Once you’re ready, make your investment and then monitor your portfolio to ensure that the assets in your portfolio are performing well based on your investment strategy.

Keep in mind that investing is a long-term game; it’s important to be patient and resist the urge to sell when the markets are down. If you stick to your plan and invest for the long haul, you’ll be more likely to reach your financial goals.

4 Types of Investments for Beginners

There are a wide variety of investment options available to beginner investors. Some people may invest in cryptocurrencies or commodities, while others may be interested in annuities and penny stocks. However, the following assets are generally best suited for the beginning investor.

1. Stocks

When you think of investing, you probably think of the stock market. A stock gives an investor fractional ownership of a publicly-traded company in units known as shares. Investing in stocks as a beginner can be an ideal way to build wealth.

Investors make money on stocks through capital appreciation, dividends, or both. Capital appreciation occurs when you buy a stock at one price, then sell it for a higher price in the future. The company may pay dividends if it distributes part of its profits to its shareholders.

💡 Recommended: How to Invest in Stocks: A Beginner’s Guide

2. Bonds

Bonds are loans you make to a company or a government — federal or local — for a fixed period. In return for loaning them money, they promise to pay you periodic interest and, eventually, your principal at the end of the period.

Bonds are typically backed by the full faith and credit of the government or large companies. They’re often considered lower risk than stocks.

However, the risk varies, and bonds are rated for quality and creditworthiness. Because the U.S. government is less likely to go bankrupt than an individual company, Treasury bonds are considered some of the least risky investments. However, they also tend to have lower returns.

💡 Recommended: How to Buy Bonds: A Guide for Beginners

3. Mutual Funds and ETFs

A mutual fund is an investment managed by a professional. Funds typically focus on an asset class, industry, or region, and investors pay fees to the fund manager to choose investments and buy and sell them at favorable prices.

Exchange-traded funds (ETFs) are similar to mutual funds, but the main difference is that ETFs are traded on a stock exchange, giving investors the flexibility to buy and sell throughout the day.

Mutual funds and ETFs allow investors to diversify their holdings in one investment vehicle.

💡 Recommended: ETFs vs. Mutual Funds: Learning the Difference

4. Real Estate

Many initially invest in real estate by purchasing a home or a rental property.

If owning a home is out of reach for you, you can also invest in a real estate investment trust (REIT), a company that operates in the real estate business. You can trade a REIT on a stock exchange like you would a stock. With a REIT, an investor buys into a piece of a real estate venture, not the whole thing. There’s less responsibility and pressure on the shareholder when compared to purchasing an investment property.

Investment Strategies for Beginners

An investment strategy is a plan that outlines how you will invest your money. An ideal strategy should consider your financial goals, risk tolerance, and time horizon. Here are two recommended strategies for beginner investors.

Buy and Hold

Investors practicing buy and hold strategies tend to buy investments and hang on to them over the long term, regardless of short-term movements in the market. Doing so can help curb the tendency to panic sell, and it can also help minimize fees associated with trading, which can boost overall portfolio returns.

A buy and hold strategy can be difficult as you witness the market’s volatility, where the value of your portfolio declines during certain periods. However, market fluctuations are a natural part of the market cycle. Rather than get nervous and be tempted to sell when prices drop, a buy and hold strategy will keep you in the markets if you can afford it. If you sell when prices are low, you may lock in losses and miss out on a likely market rebound.

Dollar-Cost Averaging

Dollar-cost averaging is a strategy that helps individuals regularly invest by making fixed investments on a regular schedule regardless of price.

For example, say you want to invest $1,000 every quarter in stock ABC. Each quarter, the price of that stock will vary — sometimes it will be up, sometimes it will be down. The amount of money you invest remains the same, so you buy fewer shares when prices are high and more shares when prices are low.

A dollar-cost average strategy can help individuals access a lower average share price and help them avoid emotional investing.

When Should You Start Investing?

It’s ideal to start investing as soon as possible, as long as you have established an emergency fund and paid off high interest debts. The earlier you start, the more time your money has to grow. It’s better to start investing when you’re young, setting aside a little bit of money each month toward your portfolio, rather than wait until you’re older and have to invest a more significant portion of your income to meet your goals.

Additionally, when you start investing when you’re young, you can more easily benefit from compounding returns. Compound returns mean any gains you earn are reinvested to earn additional returns.

How Much Money Do You Need to Start Investing as a Beginner?

You can start investing with as much money that fits your budget and financial goals. The amount of money you need to start investing as a beginner can vary depending on the type of investment you want to make. For example, if you want to buy shares of a company, you will need to have enough money to cover the cost of the shares. If you want to invest in a mutual fund, you will need to have enough money to cover the minimum investment amount.

Fortunately, you can invest with only a few bucks at a time these days because many brokerage firms offer fractional share investing, allowing investors to buy smaller amounts of a stock they like. Instead of purchasing one stock at the value for which the stock is currently trading — which could be $1,000 or more — fractional share investing makes it possible to buy a portion of one stock. Investors can utilize this to use whatever dollar amount they have available to purchase stocks.

The Takeaway

Learning how to invest doesn’t have to be complicated. Like many things in life, it takes time and experience to gain the knowledge to do it successfully. As long as you begin sooner rather than later, you can start building wealth to meet your financial goals.

If you want to learn everything you can about the markets and have control over your portfolio, SoFi’s all-in-one online investing platform might be the choice for you. With SoFi Invest®, you can trade stocks and ETFs with no commissions for as little as $5.

Want to learn more about how SoFi may be able to help you reach your long-term financial goals? Get started with SoFi Invest today.

FAQ

What are the most popular investment options for beginners?

Some popular beginner investments include stocks, mutual funds, and exchange-traded funds (ETFs).

What are some simple investment strategies for beginners?

Some common investment strategies for beginners include buy and hold and dollar-cost averaging. Many beginners may also employ an index investing strategy, buying ETFs and mutual funds that track a benchmark index, like the S&P 500.

SoFi Invest®

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

Institutional vs Retail Investors: What’s the Difference?

Who Is Considered a Retail Investor?

Who Is Classified as an Institutional Investor?

What Are the Differences Between Institutional Investors vs Retail Investors?

What Are the Similarities Between Institutional Investors vs Retail Investors?

Do Institutional or Retail Investors Get the Highest Returns?

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

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

How Many Retail Investors Are There?

Types of Institutional Investors

1. Commercial Banks

2. Endowment Funds

3. Pension Funds

4. Mutual Funds

5. Hedge Funds

6. Insurance Companies

Getting Started as a Retail Investor

FAQ

What are the different types of investors?

What percentage of the stock market is made up of institutional investors?

Are institutional or retail investment strategies better?

Guide to Writing Put Options

Writing Put Options

Maximum Profit/Loss

Breakeven

Writing Puts for Income

Put Writing Example

Put Option Exit Strategy

Finally, user-friendly options trading is here.*

Trade options with SoFi Invest on an easy-to-use, intuitively designed online platform.

The Takeaway

FAQ

What happens when you sell a put option?

How would you write a put option?

When would you write a put option?

9 ESG Metrics Investors Should Know

What Are ESG Metrics?

The Importance of ESG Metrics

9 Common ESG Metrics Businesses Track

3 Common Environmental Metrics

3 Common Social Metrics

3 Common Governance Metrics

How Can Investors Use ESG Metrics?

How do Firms Report ESG Metrics?

The Takeaway

Guide to Buying Stocks With a Credit Card

Using Your Credit Card to Buy Stocks

Benefits of Buying Stocks With a Credit Card

Risks of Buying Stocks With a Credit Card

Factors to Consider Before Buying Stocks With a Credit Card

Investment Fees

Cash Advance Fees

Transfer Fees

Interest

Avoiding Scams When Buying Stocks With a Credit Card

Does Buying Stock With Your Credit Card Affect Your Credit Score?

Alternatives to Buying Stocks With a Credit Card

The Takeaway

FAQ

What is credit card arbitrage?

What are the risks of credit card arbitrage?

Does buying stock with a credit card affect my tax?

Should I buy stocks with my credit card?

Is it safe to buy stocks with a credit card?

Do stockbrokers accept credit card payments?

Investing for Beginners: Considerations and Ways to Get Started

Why Is Investing Important?

Things to Consider as a Beginner Investor

Investment Goals

Time Frame

Risk Tolerance

Portfolio Diversification

How to Start Investing

Step 1: Open an Investment Account

Step 2: Do Your Research

Step 3: Invest and Monitor Your Portfolio

4 Types of Investments for Beginners

1. Stocks

2. Bonds

3. Mutual Funds and ETFs

Finally, user-friendly options trading is here.^*

Student Loan
Refinancing

Personal
Loans

Online
Investments