Dec
21
2021
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What to Know About Investing in Cryptocurrency

By | Growing Wealth, invest, Investing | No Comments

Since the launch of Bitcoin in 2009, thousands of different cryptocurrencies have entered the market, providing investors with an intriguing — and sometimes confusing — array of choices.

While investing in crypto may offer growth potential, cryptocurrencies as a whole have proven to be a volatile asset class, posting double-digit percentage gains and losses — sometimes within a single day. While such wild price swings have generated lucrative returns for some, others have suffered painful losses.

It’s important for investors to understand the fundamentals and risks of the cryptocurrency market before they start investing. Here’s a closer look at some basics.

Cryptocurrencies 101

Some consider cryptocurrencies to be a form of currency, while others see them as a store of value similar to gold. While the Securities and Exchange Commission (SEC) has yet to decide whether cryptocurrencies can be considered securities or commodities, the reality is that these new instruments have revolutionized the way we think of finance and financial markets.

Not that anyone could have predicted that in 2008, when a person or group using the pseudonym Satoshi Nakamoto published a paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Despite the mystery surrounding Nakamoto’s identity, bitcoin successfully launched in January of 2009.

The first altcoins — a term that refers to “alternatives to bitcoin” — were released in 2011, including Litecoin.

News reports tied use of bitcoin and other cryptocurrencies to illegal activity on the dark web. Some major scams and company failures, including the theft of hundreds of thousands of bitcoin on the crypto exchange Mt. Gox, contributed to volatility in the market’s early years.

However, by 2017, mainstream interest in bitcoin and other cryptocurrencies skyrocketed, sending its price close to $20,000. Despite ongoing price fluctuations, by 2021 bitcoin was not only the oldest crypto on the market but still the largest by market cap.

In November 2021, bitcoin would reach an all time high of nearly $69,000 and a total market cap of nearly $1.1 trillion, while the entire crypto market surpassed some $2 trillion in market value.

However, worries of a regulatory crackdown caused many crypto prices to fall in December 2021, as SEC Chair Gary Gensler indicated that many crypto might qualify as securities and thus fall under SEC regulations.

Blockchain 101

Not every cryptocurrency is built using blockchain technology, but some of the largest ones are. A blockchain is an unchangeable record of transactions. These transactions don’t have to be monetary in nature. Blockchains can be used to create contracts, to track the movement of products, to record votes, to prove that property transfers took place, and much more.

Cryptocurrencies and blockchains work hand in hand. For example, here’s how Bitcoin mining works: new coins are created through the process of maintaining the accuracy of its blockchain. Miners use computing power to solve complex cryptographic equations. As these equations are solved, they prove that all of the transactional information on the bitcoin blockchain is accurate.

As a reward for maintaining the blockchain, Bitcoins are created and given to the miners. The bitcoin blockchain is public and decentralized. This means that anyone can view any transaction between two bitcoin addresses. However, you don’t know who owns those addresses.

The decentralization of the blockchain means that there isn’t a single individual, company, or government in charge of Bitcoin and the blockchain. Changes to the blockchain code can be proposed and adopted by the miners. However, 51% or more miners must opt into a change in order for it to be implemented, otherwise Bitcoin forks into two markets.

Cryptocurrency Risks

Every investment comes with risks, and cryptocurrencies are no exception. Here are some the biggest ones investors should be aware of:

1.    Price Volatility: As mentioned, the price of Bitcoin halved within the span of a couple weeks in 2021. While the stock market is known for being a volatile asset class, the turbulence in share prices is nowhere near that of cryptocurrency prices. The market is still highly speculative, making it prone to big price swings and increasing the risk of investors locking in losses.

Recommended: Why is Bitcoin So Volatile?

2.    Theft: One of the choices investors have to make after buying cryptocurrencies is whether to store the coins and tokens in a hot wallet or cold wallet. Hot wallets are digital storage tools. The risk to them is that they’re more vulnerable to hacks and theft. Take for instance the Mt. Gox incident that occurred in 2011. While the cryptocurrency market has come a long way in terms of security since then, theft and hacks are still a risk.

3.    Fraud and Scams: The buzzy nature of the cryptocurrency industry unfortunately means that scammers are also drawn to the market. In 2021, the Federal Trade Commission (FTC) reported that between October 2020 and May 2021, more than 7,000 people reported losses of more than $80 million from bogus investment opportunities.

4.    Forgotten Keys: While the cold wallet storage solution can prevent hacks, some users of this method have fallen into the unfortunate situation of not remembering their wallet password – or “keys” in crypto lingo. That means there could be fortunes that individuals are not able to cash in on. Of the existing 18.5 million Bitcoin in circulation in January 2021, about 20% was estimated to be “lost” or trapped in a wallet.

5.    Regulatory Oversight: Chinese regulators stoked volatility in the cryptocurrency market in 2021, after clamping down on crypto mining operations and ordering payment firms to not do business with companies in the industry. U.K. regulators have also banned a leading crypto exchange. More crypto rules and regulation, including from countries like the U.S., are also expected, which could cause repercussions for usage and prices.

Basic Cryptocurrency Terminology to Know

As cryptocurrency has been growing over the past decade, industry jargon has developed. This terminology is important to know when starting to purchase and store cryptocurrencies. Here are some of the most commonly used words in the crypto space:

Address

If you’re using bitcoin, you have a public “address” where people can send you bitcoins. If you send someone bitcoins, they will see that they received them from your public address. Anyone can look up that public address and see how many bitcoins are in it.

You also have a private address, which is how you secure your bitcoins. Never give anyone your private address. Addresses are generally made up of a string of alphanumeric characters.

Altcoin

Any cryptocurrency that is not bitcoin is called an altcoin.

Crypto

Crypto is simply a shorter name for cryptocurrency.

Decentralization

As mentioned above, blockchain isn’t owned or controlled by anyone, making it decentralized. Many people in the blockchain space feel that decentralization creates more fairness.

Distributed Ledger

A dispersed recording of replicable, synchronized data. In the case of cryptocurrencies, the blockchain is a distributed ledger shared across many different computers and networks.

Exchange

Websites where you can purchase and sell cryptocurrencies are called exchanges.

Fork

A “fork” is when a blockchain permanently splits into a new version. This can take place when miners vote on a change, when a group takes over 51% of the network and changes the blockchain, or if there’s a bug or more commonly a new set of consensus rules come into existence.

FUD

Fear, uncertainty, doubt. FUD describes the emotions that can create panic and cause people to make decisions that affect the market.

Start buying Bitcoin, Ethereum,
and Litecoin today.

HODL

HODL is the philosophy of holding onto and not selling cryptocurrencies. A misspelling of “hold,” this was a joke that became a common term.

ICO

ICO is short for initial coin offering. An ICO is held when a company is raising funds and sells tokens to public or private buyers who then become backers of the project.

Mining

The computing process used to create crypto tokens. Not all cryptocurrencies are created using mining, but it is a common method.

Multisig

There are ways that you can set up a cryptocurrency transaction which require multiple people to sign off on the transaction for it to go through. This is called a multisig transaction.

Peer to Peer

A peer-to-peer (more commonly abbreviated as “P2P”) system doesn’t have a central controller; instead, users interact directly with one another. For example, there are peer-to-peer exchanges where you can sell your bitcoins directly to someone in your local area.

Pumping

When cryptocurrency information gets sensationalized in the media to raise its price or popularity, this is called pumping.

Smart Contract

Smart contracts are coded contracts written into blockchains that allow automated transactions to be executed.

Wallet

Cryptocurrencies are stored in virtual “wallets.” If you keep your cryptocurrencies on an exchange, that exchange controls your wallet. You can also use a digital wallet such as an app on your phone or computer.

One popular form of cryptocurrency wallet is a hardware wallet, which is like a flash drive that stores your cryptocurrencies offline but allows an easy connection to your computer for transacting. There are also paper wallets, which are (believe it or not) simply written records of your public and private addresses for your cryptocurrency. Online wallets are called hot wallets, while offline wallets are called cold wallets or cold storage.

Whale

A person who owns a significant amount of a cryptocurrency. When that person trades it they can actually affect the market price. These people are called whales.

The Top 10 Largest Cryptocurrencies

There are more than 7,000 cryptocurrencies on the market today, according to estimates. Each of them offers different characteristics in their transaction times, liquidity, privacy, and other factors.

Below are the top 10 biggest by market cap, as of July 23, 2021, according to data from CoinMarketCap, which calculates cryptocurrency market caps by taking the price of a digital currency and multiplying it by the number of coins in circulation.

For instance, with Bitcoin, the world’s biggest cryptocurrency by market cap, the price is $32,439.03 and the circulation supply is 18,764,331 on July 23, 2021. Multiplying the two numbers gets a market cap of about $609 billion. CoinMarketCap does this with the biggest cryptocurrencies and then ranks by the market cap of each.

Recommended: Top 30 Crypto By Market Cap

1. Bitcoin

As the first to market, Bitcoin (BTC) continues to be the most popular and highest valued crypto. Any new industry development — including physical ATMs and crypto credit cards — generally works with Bitcoin first.

Major companies now accept Bitcoin, but Bitcoin has a scalability issue, in that it currently can only process seven transactions per second. Visa®, by contrast, can process a maximum of 24,000 per second. Work is being done to improve this transaction speed, but for now Bitcoin may not be the best long-term store of currency to buy your latte with.

2. Ethereum

Although ethereum (ETH) is a cryptocurrency — also known as ether — its main appeal stems from its software platform. The Ethereum network allows for the creation of smart contracts and decentralized applications to be built on it. The cryptocurrency is used to develop and run applications on the software platform, and by investors purchasing other tokens using ether.

3. Tether

Tether (USDT) was the first cryptocurrency marketed as a “stablecoin” – virtual money designed to maintain a fixed value. In the case of Tether, the value of the coin is pegged to a fiat currency – the U.S. dollar. Hence, its ticker is USDT.

In February 2021, the New York attorney general’s office settled a two-year investigation on tether and its sister crypto exchange Bitfinex. Tether had claimed that all its tokens were backed on a one-to-one basis by U.S. dollars in cash reserves.

4. Binance Coin

Binance is the world’s largest cryptocurrency exchange–popular because of its low trading fees. Binance Coin (BNB) is the cryptocurrency “native” to the exchange, which means that it was designed specifically to be used in the Binance ecosystem. Binance Coin launched in 2017 with an ICO.

Binance tries to incentivize investors to use Binance Coin by allowing them to get a 25% discount on trading fees if they use BNB to pay for trades.

5. Cardano

While Cardano lacks some features, it’s considered by some market participants to be a work in progress and has potential to be a cheaper alternative to Ethereum in being a basis for DeFi and NFT projects.

A key feature of ADA is that it has a proof-of-stake blockchain. This means the complicated proof-of-work calculations and high electricity usage required for mining coins like Bitcoin aren’t necessary. Instead, all ADA coins are pre-mined. That could make Cardano appealing to investors who have been critical of the environmental costs of cryptocurrencies like Bitcoin.

6. Ripple

Ripple (XRP) was created to be used by existing banking institutions. Ripple network can process 1,500 transactions per second. Unlike Bitcoin and many other cryptocurrencies, XRP is not on a blockchain network. Instead, it’s based on what’s called a “hash tree.”

In 2020, the Securities and Exchange Commission sued Ripple and its executives for allegedly misleading investors in XRP by selling more than $1 billion of the virtual tokens without registering with the regulator.

7. USD Coin

USD Coin (USDC) is a stablecoin powered by Ethereum blockchain that is pegged to the U.S. dollar. After the stablecoin Tether came under regulatory trouble for how much it actually backs in reserves, Circle has said its reserves are evaluated and audited by Chicago-based accounting firm Grant Thornton LLP.

In March 2021, Visa announced that it would allow the use of USDC to settle transactions on its payment network–a sign of mainstream acceptance of the crypto market.

8. Dogecoin

Dogecoin had a meteoric rise in 2021, surging through the month of May. The cryptocurrency was started as a joke by its founders in 2013. One of Dogecoin’s most notable features is that it has a Shiba Inu dog on its symbol.

Dogecoin enjoyed popularity in a pattern similar to the way meme stocks did in 2020. Tesla CEO Elon Musk was an advocate of Dogecoin, touting it on social media. On June 1, cryptocurrency exchange Coinbase said it would accommodate Dogecoin, signalling more mainstream acceptance of the cryptocurrency.

9. Polkadot

Polkadot’s coin is called dot (DOT). Polkdot’s creator Gavin Wood is also the co-founder of Ethereum. He wrote the original white paper for Polkadot in 2016.

Central to Polkadot are “parachains” — blockchains that can run higher transaction throughput than Ethereum through design. “Parallel blockchains” — transactions that are spread across multiple computers, similar to parallel processing — have also been touted as having potential as an alternative to Ethereum.

10. Binance USD

Binance USD (BUSD) is a stablecoin that is issued by Binance, the world’s largest cryptocurrency exchange. It’s pegged to the U.S. dollar on a one-to-one basis. It runs on the Ethereum network so can be accepted everywhere for payments or loans where other ERC-20 tokens are.

The Takeaway

Cryptocurrencies can be purchased on major cryptocurrency exchanges or crypto trading platforms. While the digital-asset market is new, trendy and could be a growth opportunity, it’s important for investors to understand that it’s also highly speculative and that all the issues related to safety and security haven’t been worked out.


On SoFi Invest®, investors can trade cryptocurrencies with as little as $10. Their first purchase of $50 or greater will get them a bonus of up to $100 in bitcoin. See full terms at sofi.com/crypto. Cryptocurrencies like Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic can be traded 24/7. Plus, SoFi takes security seriously and uses a number of tools to keep investors’ crypto holdings secure.

Get started trading crypto on SoFi Invest today.



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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

CRYPTOCURRENCY AND OTHER DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE


Cryptocurrency and other digital assets are highly speculative, involve significant risk, and may result in the complete loss of value. Cryptocurrency and other digital assets are not deposits, are not insured by the FDIC or SIPC, are not bank guaranteed, and may lose value.

All cryptocurrency transactions, once submitted to the blockchain, are final and irreversible. SoFi is not responsible for any failure or delay in processing a transaction resulting from factors beyond its reasonable control, including blockchain network congestion, protocol or network operations, or incorrect address information. Availability of specific digital assets, features, and services is subject to change and may be limited by applicable law and regulation.

SoFi Crypto products and services are offered by SoFi Bank, N.A., a national bank regulated by the Office of the Comptroller of the Currency. SoFi Bank does not provide investment, tax, or legal advice. Please refer to the SoFi Crypto account agreement for additional terms and conditions.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

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

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Sep
29
2021
Financial Planning

Should I Invest if I Still Have Debt?

By | Budgeting & Goals, Fresh Out of School, Growing Wealth, invest, Investing, Student Loans | No Comments

As you start to establish yourself financially, you may come to a crossroads: should you pay off debt or invest in your future? It can be confusing to know what to do in this situation, especially if you have multiple financial goals you’re saving toward.

The first step is to look at the numbers, then to consider your preferences. There is no one “right” answer to this question. Let’s start by taking a look at the numbers around major financial milestones like your student loan, buying a home, and saving for retirement.

Let’s say your student loan is $75,000. Buying a new home might cost $350,000, and you might plan to need $2,000,000 for a comfortable retirement. Everyone’s numbers will look a bit different, so feel free to take some time to calculate yours.

Once you’ve put your estimated numbers on a page, what jumps out at you? It’s hard not to notice that retirement is quite a bit more expensive than the others. This isn’t too much of a surprise if you consider what retirement is: living for decades with no salary.

While you might be tempted to put all your extra income immediately into your retirement fund, it’s not necessarily the winning decision when it comes to whether to pay off loans or invest. Let’s look deeper.

How Important is Paying Off Your Student Loans?

If you’re like the average student, you’ve borrowed $30,000 or more to pursue a bachelor’s degree . If you went on to graduate school, your student loan debt may be even higher.

Most federal student loans have a repayment period of 10 to 30 years. You may opt to make the minimum payment each month for the duration of your loan repayment plan, or you might decide to pay yours off early.

One benefit to paying off a student loan early is that you reduce your debt to income ratio (that’s how much debt you have compared to how much income you have). This might raise your credit score and help you qualify for other financial solutions.

Or, you might decide to continue paying your student loan while investing in other areas of your life, like retirement or buying a home.

Know Your Student Loan Interest Rates

Before you can decide whether to pay off student loans or save for other things, look at what you’re paying in interest for your student loans. If the rate you locked in when you took out your loan is higher than current rates, you might consider student loan refinancing. If you have multiple student loans, you could potentially consolidate and refinance them for a lower interest rate.

Of course, it’s important to keep in mind that refinancing federal student loans means you’re no longer eligible for federal benefits and protections, like income-driven repayment or loan forgiveness programs, so it makes sense to weigh the potential benefits and risks of refinancing before taking the plunge.

Comparing interest rates is an exercise in opportunity cost. Any decision to pursue one goal means you’re missing out on something else, but ideally, we look to minimize opportunity costs when assessing financial trade-offs. In this instance, the opportunity cost is leaving potential investment earnings on the table.

Let’s say you recently refinanced your student loan from 5% to 3.5%. Given the competitive rate on your newly refinanced student loan, you could consider continuing to make the monthly payment on your loan and allocating the extra cash flow elsewhere — like investing for retirement or buying a home.

Remember, we want to think about interest rates in terms of opportunity cost. What would it look like if you paid off your loan early? Your student loan costs you 3.5% annually, and that’s what you’ll “save” if you accelerate your payoff by $500 per month.

Once you paid off the loan early, you could invest your money in an asset class — such as the stock market — with the potential to earn a rate of return that’s higher than 3.5%. Historically, the stock market has returned an average of 10%. This investing can be done within a retirement account, whether a 401(k) or an IRA.

That said, stock market returns are erratic, and the annualized return figures you often hear quoted are just that — an average. Investing is risky, and there is always a chance that returns over the next five, 10, or 20 years will not outpace the interest that you are currently making on your student loan payment.

No one, not even a financial planner, has a crystal ball and can see into the future. This is why we also need to take into account your personal preferences.

If you feel like you are truly missing out on investing in an IRA or saving for a home, then investing in those things might be the right path for you. If your student debt makes you feel burdened and miserable, you could focus on that instead.

Paying Off Student Loans vs. Investing

“So, should I pay off student loans or invest,” you ask.

The answer is…it’s complicated.

Student loans often come with low interest rates, which means you’re not paying a huge amount of extra money over the years (like you would with a credit card, for example). So it’s low-cost debt. That means that if you want to invest in other areas of your life, such as saving for retirement or to buy a house, you may be able to do both.

Contributing to a Retirement Account

Many Americans are vastly under-saving for retirement, and with so many employers offering a 401(k) matching program, not contributing is like throwing money down the drain.

There is no standard for match programs — they can range from meager to generous. Between your contributions and your employer’s, it is often recommended that you save between 15% and 20% of your salary for retirement. You can do this by contributing the full allowable amount to your 401(k), which is $19,500 in 2021.

If you don’t have access to a 401(k) — perhaps you’re self-employed — you can save for retirement with other investment accounts like an online IRA or a brokerage account. No matter which account you use, you might want to consider putting that money to work with a long-term investment strategy. For example, you might choose to deploy a strategy of low-cost mutual funds that invests in stocks and bonds.

Buying a Home

Financial planners don’t all agree on whether a home is a good investment. That is not to say that a home is not a good financial goal; if it’s a priority to you, then it’s great. This is simply a commentary on whether a home produces a good return on investment.

Although a house may not have as high an investment return as other asset classes, such as the stock market, a house provides something that a stock or bond cannot — immediate utility. You cannot sleep and eat inside a stock or a bond.

While home values do typically grow over time, you must also take into consideration the costs of buying and owning a home, such as the interest paid on the mortgage, property taxes, and repairs and maintenance. That said, homeownership can be rewarding, and can pay major dividends down the line. One big benefit is having no monthly housing expenses (like rent or a mortgage) in retirement.

The Takeaway

There is no hard and fast rule when it comes to investing while juggling debt. Undoubtedly, the biggest ticket item you’ll need to invest for is retirement — but whether you invest in retirement before or after paying down debt depends on your personal preferences and situation.

One thing to remember: Financial tradeoff decisions don’t always have to be all-or-nothing. You might choose to split the difference by putting a little here and a little there. For example, you might contribute $300 per month to your 401(k) and $200 to a high-yield savings account for your down payment for a house, all while paying off student loans.

With SoFi Invest®, you can invest in traditional and Roth IRAs, crypto, or ETFs, with hands-on active investing or automated investing. The choice is yours — based on your personal situation, goals, and preferences.

Find out how to invest for your future with SoFi Invest.

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

CRYPTOCURRENCY AND OTHER DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE


Cryptocurrency and other digital assets are highly speculative, involve significant risk, and may result in the complete loss of value. Cryptocurrency and other digital assets are not deposits, are not insured by the FDIC or SIPC, are not bank guaranteed, and may lose value.

All cryptocurrency transactions, once submitted to the blockchain, are final and irreversible. SoFi is not responsible for any failure or delay in processing a transaction resulting from factors beyond its reasonable control, including blockchain network congestion, protocol or network operations, or incorrect address information. Availability of specific digital assets, features, and services is subject to change and may be limited by applicable law and regulation.

SoFi Crypto products and services are offered by SoFi Bank, N.A., a national bank regulated by the Office of the Comptroller of the Currency. SoFi Bank does not provide investment, tax, or legal advice. Please refer to the SoFi Crypto account agreement for additional terms and conditions.

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 emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

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Aug
16
2021
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How to Trade Stocks Online

By | Growing Wealth, Investing | No Comments

If you’ve been investing for a while now—maybe through your employer’s 401(k) or an IRA—and you’re ready to take a more hands-on approach, you’re in luck. A growing number of financial firms are making online trading more convenient and affordable with easy-to-use websites and apps—often with no minimum balance required and commission-free trades.

Some online brokerages even allow investors to buy partial shares of company stocks they might not have had access to in the past because of the cost. Thanks to innovations in financial technology, or fintech, you can now buy and sell stocks and other securities from the comfort of your own couch—or while you wait in line for a latte.

But before you start buying and selling stocks from your phone, you’ll want to have at least a basic knowledge of how the market works; how online brokers execute trades; and how to develop an investing process that fits your personality, plans for the future, and bank account.

Here are some things to consider:

What Is Stock Trading?

All investors take a calculated risk with their money, with the aim of making a profit. But whether you are an investor or a trader depends on how long you typically hold on to investments. Investors are generally looking to grow their savings over the long-term for future goals, stock traders typically try to capitalize on short-term price fluctuations. That can take more time, attention, and exposure to risk than many investors would prefer to commit.

Are You an Investor?

Investors may track what’s happening with the major indexes and the securities in their portfolio, and they might do research or seek advice about the best companies in which to invest. But they’re more likely to use a buy-and-hold strategy—purchasing and keeping stocks or other securities with the idea that these investments will continue to increase in value over years or even decades.

Or Are You a Trader?

Traders keep a close eye on the market throughout the day. They pay attention to current news, tips, and research, and buy and sell stocks frequently. An active trader might buy and sell stocks several times a month, with the goal of beating the market (or getting a better return than the market average). A “day trader,” on the other hand, might buy and sell the same stock in one day, hoping to turn a quick profit and then move on to the next opportunity.

Or Are You Both?

There’s no rule that says you can’t engage in both passive and active investing. You might use your tax-deferred IRA to save for the long haul, for example, but set aside some money to try your hand at trading stocks as well.

It’s up to you how hands-on or hands-off you want to be. But knowing your investment style can help you decide if you’re really up for trading stocks yourself (instead of leaving most of the work to someone else). It also could help you choose a financial firm with the services you require.

Which Type of Broker Suits Your Style?

Investors and traders have a lot of options when it comes to choosing a broker—from long-established financial firms to newer names that offer intuitive online trading platforms and often lower costs.

If you want more help, you might be willing to pay extra for a full-service brokerage with a physical office and an actual person who takes and executes client orders. Or you might decide to limit human interaction (which can get expensive) and instead choose automated investing, leaving the heavy lifting to a robo-advisor that uses computer algorithms to build and manage an investment portfolio.

But if you truly want to get into researching and picking your own stocks, and executing trades on your own schedule, an active investing account with an online brokerage might be the right call.

Many financial websites offer up-to-date reviews of online brokerages, so that can be a good place to start researching. Some factors to consider might include:

•  The broker’s commission fees (many sites now offer free trading)

•  Account minimums (some online brokers don’t require a minimum deposit)

•  Available products (in addition to stocks, you may want to look at exchange-traded funds (ETFs), mutual funds, and/or fractional shares of stock)

•  Educational features

•  Other perks

Of course, you’ll be looking for a company with a solid reputation and good customer service. You can use the BrokerCheck database offered by the Financial Industry Regulatory Authority (FINRA) to get information on the background and experience of financial brokers, advisors and firms.

Once you choose your brokerage, you can open an account whenever you’re ready. (You don’t have to start trading right away.) You’ll probably need to provide your Social Security number and your driver’s license number or other ID. If you’re funding your brokerage account with an electronic transfer from your bank account, you’ll also want to have that information on hand. The website may ask for other information as well, to assess your goals and risk tolerance.

Learning How to Trade Stocks

Once you’ve funded your brokerage account you can start buying stocks. But be prepared—those decisions can be daunting for a newbie. While opening an account is easy, actually getting started investing may be a bit harder.

If you’re not sure where to start, you may want to look at exchange-traded funds, which offer the diversification of mutual funds but trade continuously throughout the day like stocks. ETFs are typically less expensive than either mutual funds or stocks.

Another way to get into the market at a lower cost might be to invest in fractional shares, or pieces of single shares of stocks you might otherwise find too expensive. With SoFi Invest’s fractional shares program, for example, investors can build a portfolio with big-name companies. But instead of buying whole shares, buyers specify the dollar amount they want to spend on a company’s stock. Before you invest in whole or partial shares, you may want to use an online screener to narrow your choices to stocks that meet your specific requirements and do some technical and fundamental research on potential investments. For example, are you looking for companies within a certain size range, or market capitalization (micro, small, mid, or large)? Is there a range you want to stay within when it comes to the price-to-earnings ratio (P/E)?

Recommended: How Market Capitalization Impacts Stock Value

Most screeners offer several filters to choose from, so you can find stocks at the price you want, or in a designated industry, or within a certain level of volatility. There are several well-reviewed free screeners available that may suit your needs as a beginner, including Zacks, FINVIZ, Yahoo Finance, TD Ameritrade, and TC2000. Or you might decide to pay for a subscription service that offers more in-depth analysis.

Even if you use a screening tool, it can be useful to do your own stock research as well. There are plenty of online sites that can help you learn more about how to trade stocks and calculate stock values. And many brokerages, including SoFi, provide users with educational resources and newsletters.

In addition, the Securities and Exchange Commission (SEC) requires all public companies to file financial documents with data that could help you further assess a stock’s value. You can use the SEC’s Electronic Data Gathering, Analysis, and Retrieval system, EDGAR , to access that information.

How Do You Feel About Risk?

How much risk are you willing to take when trading stocks online?

If you’re OK with a white-knuckled, stomach-churning roller-coaster ride—and you’re willing to lose everything on an investment—you can throw caution to the wind. But if you’re hoping to make money without chronic anxiety, you’ll probably want to put some strategies in place to better manage your risk. That might include:

Knowing How Much You Can Afford to Lose

Do you have your financial bases covered (with an emergency fund, for example, and good insurance that will cover you if an unexpected health, home, or automobile expense pops up)? Are you current on your bills, and are you socking away some money for retirement? Even if you’re feeling pretty financially secure, you may want to set a clear limit on how much you’ll spend on any stocks that might expose you to more volatility and, therefore, a greater potential for loss.

Keeping Your Emotions in Check

Thanks to 24/7 access to market news, and instant reactions on social media, it can be tough to tune out distractions that can lead to knee-jerk trading moves. Greed is a tough emotion to ignore when a friend or co-worker shares a hot stock tip. And fear can easily get the better of you when you watch your favorite stock suddenly drop.

As you begin trading, you may consider a journal to document what you did and why you did it, and measure your performance against a benchmark index like the S&P 500. Reviewing those notes could help you analyze and improve how you react to changes in the market. (You’ll also want to keep good records so you can manage the tax consequences of any gains and losses in your brokerage account.)

Diversifying Your Portfolio

It’s one thing to occasionally take a small gamble on a trendy stock. It’s another to put all your money into just one stock (even a Blue Chip), or one sector, or one asset class. Keeping a balanced mix of investment types could help lower your risk—and make following your gut once in a while a little less gut-wrenching.

Again, this is where ETFs or fractional shares can come in handy. It also may be useful to work with an advisor to establish an appropriate asset allocation strategy and set up a plan that helps keep you on track as you make moves on your own.

Recommended: Differences in Speculation and Investing

What Type of Trade is Right for You?

When you’re ready to start using your broker’s website or app to buy and sell stocks, you’ll see there are a few different options for order types, which dictate how your trade goes through.

The type of order you use will likely vary from one situation to the next, depending on how many stocks you’re hoping to buy or sell, how liquid the stocks in question might be, or if the stock is currently under- or over-valued. And once you get more comfortable, you may want to add more strategies (such as options and futures) to your trading repertoire. So it’s a good idea to be well-versed in all the possibilities, their pros and cons, and how they might work in various scenarios.

The two most common orders are:

Market Orders

If you place a market order to buy, you’re saying you’ll purchase the stock “at market,” or at the current lowest asking price. If you place a market order to sell, you’re saying you’ll sell for whatever the highest bidding price is at that time. Because you aren’t holding out for a better price, brokers can generally fill market orders pretty quickly.

Limit Orders

If you place a limit order, you’re telling your broker in advance the price you want to get on the trade. If your broker can get the price you want (or better), they will execute the trade. But if no one is buying or selling at the price you’ve set, the trade won’t happen.

Ready to Get Started?

If you’re feeling overwhelmed, you may want to practice a bit using a free stock-trading simulator that could help you become more fluent in market terms and actions. But with your online brokerage account funded, you also could begin making small trades to get your feet wet and see how it feels.

The Takeaway

Once you begin trading stocks online, you’ll probably be able to gauge pretty quickly what works for you and what doesn’t, both financially and psychologically. Learning the basics of online trading can up your comfort level even before you get started, but executing some money-making trades will likely build your confidence. (Making some not-so-great trades could also help you finetune your process.)

With innovative trading tools like SoFi Invest® brokerage platform, you can start slowly. With SoFi Invest, you’ll have a variety of investment alternatives to choose from. And you can count on SoFi’s educational resources, real-time investing news, and advisors for help when you need it.

Learning how to trade stocks is exciting. Get started with a SoFI Invest account

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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 emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Stock Bits
Stock Bits is a brand name of the fractional trading program offered by SoFi Securities LLC. When making a fractional trade, you are granting SoFi Securities discretion to determine the time and price of the trade. Fractional trades will be executed in our next trading window, which may be several hours or days after placing an order. The execution price may be higher or lower than it was at the time the order was placed.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Jun
28
2021
What Are Currency Hedged ETFs?

What Are Currency Hedged ETFs?

By | Financial Independence, Growing Wealth, invest, Investing | Comments Off on What Are Currency Hedged ETFs?

Currency-hedged ETFs are exchange-traded funds created to minimize the risks of fluctuating exchange rates in ETFs that have foreign holdings.

Many investment companies offer two versions of the same ETF with one version including a currency hedge. The latter ETF has the same holdings as the former, but it also includes derivatives purchased to protect–or hedge–against currency risk. The protections come at a cost, however, and hedged ETFs may have higher fees than non-hedged ETFs.

Recommended: ETF Trading 101: How Exchange Traded Funds Work

Why Do Investors Use Currency-Hedged ETFs?

Since currency values fluctuate, exchange rates can affect the total return on an asset. While ETFs provide investors with a significant diversification, they don’t offer any protection against the investment risk created by foreign exchange rates. So purchasing an ETF focused on overseas markets creates an additional layer of volatility within the investment.

Currency shifts can boost or diminish returns on international investments — but they almost always make them more uncertain. If the local currency loses value against the ETF’s currency (in this case the dollar), that can offset returns for the dollar-based investor, even if the assets that make up the security’s returns go up in their own currency.

Since many ETF investors are not interested in forex trading, they can minimize their currency risk by purchasing a currency-hedged ETF, which can smooth out volatility related to foreign exchange rates.

Currency-hedged ETFs may have a slightly higher expense ratio than non-hedged ETFs, due to the cost of the futures contracts as well as potential expenses associated with the tools and people who develop the hedged currency strategy.

Recommended: How to Invest in International Stocks

How Do Exchange Rates Impact Investment Returns?

While a strong dollar may be good when you’re buying assets in a foreign currency, it can hurt returns on assets denominated in a foreign currency. Over the past decade, the strong dollar has meant that hedged portfolios tend to outperform those that weren’t hedged.

Here’s an example: If the dollar-to-foreign-currency conversion rate is 1 to 2, as in one dollar buys you two units of the foreign currency, and you buy 100 shares of a stock at 5 foreign currency units per share, it will cost you $250, or 500 foreign currency units. Now, let’s say those shares double, so that 100 shares are worth 1,000 foreign currency units instead of 500 and your investment is now worth $500, compared to the $250 you spent initially.

But if the dollar strengthened so that the conversion rate went from 2 foreign currency units per dollar to 4 foreign currency units per dollar, those 100 shares are still worth 1,000 foreign currency units but for a US investor, their $250 investment would have shown no gain. While this is an extreme currency fluctuation, it illustrates the reason that some investors might purchase currency-hedged ETFs.

How Does Currency Hedging Work?

Investors use two methods to hedge against currency risk: static hedging and dynamic hedging.

Static Hedging

Static hedging is the most basic kind of hedging. An ETF that uses static hedging has one strategy that it executes, regardless of market conditions. An ETF using this strategy would buy contracts in the future market that lock in a currency’s value relative to the dollar or set parameters around it.

The contract is an agreement to buy a currency at a future price, which has the same effect of cancelling out currency gains or losses if they move from the currency’s current value against the dollar.

Dynamic Hedging

Dynamic hedging may incorporate multiple strategies or change strategies as market conditions change. Dynamic hedging is not always in effect, instead the hedge is “put on” based on the judgment of the ETF manager. Sometimes this judgment reflects an algorithm or series of rules that looks at market conditions for determining when to buy and sell financial instruments that hedge currency exposure.

For example, an ETF might have a rules-based system that looks at the trend of a currency’s value against the dollar, the interest rates in both countries, and the overall value of that currency (namely if it’s more expensive than the dollar). Those data points and, specifically, how they change over time, would determine whether and how much to hedge the ETF at any given time

The Takeaway

Currency-hedged ETFs are one way to get exposure to foreign markets and protection against the currency risks that come with that type of investment, but they may cost more than non-hedged ETFs. It’s important for investors to understand how they work, as they start to build their own investment strategy and learn how to pick ETFs to include (if any) in their portfolio.

If you’re ready to start putting that strategy into action, a great place to start is the SoFi Invest investing platform, which offers personalized investment advice, a range of ETFs, and automated investing.

Start investing today.

Photo credit: iStock/Delmaine Donson

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

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Mar
22
2021
How to Start Investing This Year

How to Start Investing This Year

By | Growing Wealth, invest, Investing | Comments Off on How to Start Investing This Year

You’ve probably been in one of these conversations, before. Someone who’s older, maybe a teacher or a family member, encourages you to start investing as soon as possible. It’s well-meaning advice.

On an academic level, you know that the younger you get started, the more you can allow the magic of compounding investment returns to work in your favor. You’re also committed to prioritizing your own financial health, and you feel inspired to work towards your own personal financial freedom.

Every new investor has to start somewhere, and there’s no better time than this year.

So, you’ve got the right idea, but you don’t have a playbook. No one taught you how to invest. You’ve heard of Roth IRAs and mutual funds, but how do you know that you’re doing the right thing?

Further, there are a lot of people with divergent opinions on the best way to invest. It’s hard to know where to go and who to listen to.

Much of learning to invest means learning to navigate the options and the conflicting advice and then distilling that down into a portfolio that makes the most sense for you and your goals.

Here are some suggestions for how to start investing in five easy steps.

1. Understanding the Options

While the universe of investment options sometimes feels limitless, it’s not. With knowledge of the core building blocks of investing, you’ll be better able to navigate the available options with ease.

Investors have a variety of options available to them, including: stocks, bonds, cash or money market funds, real estate, private equity, investment partnerships, and natural resources, like gold. These are assets, essentially, things that have economic value and can store wealth. Beginner investors may focus largely on stocks and maybe bonds.

Stocks

A stock represents a share of ownership in a company. Shareholders can make money in two ways: through the value of shares appreciating, and through dividend payouts. Although this is an oversimplification, the success of a stock will generally be correlated to the success of the underlying business. This is highly unpredictable, which leads to the volatile nature of stock prices overall.

Bonds

Bonds, on the other hand, are investments in the debt of a company or government. In this case, the bondholder is the lender, collecting a rate of interest on that debt. The terms of the contract are agreed upon at the outset. Therefore, they are typically less volatile as stocks, although they can lose value.

An investment portfolio generally includes a variety of assets, including both stocks and bonds, for diversification. The purpose of diversification is to minimize risk, especially over the long-term.

Exchange-Traded Funds (ETFs)

What about mutual funds and exchange-traded funds (ETFs)? Funds are pools of investments. It may be helpful to think of a fund as a basket that holds a bunch of investments, such as stocks, bonds, or real estate holdings. For example, an S&P 500 index mutual fund or ETF holds the 500 leading stocks in the US. Therefore, an investment in this fund is really an investment in the US stock market.

Funds are a popular and easy option for investors looking to get broad exposure to whichever market it is that you’d like to invest within. Depending on the fund, this could also be an affordable way to invest. It is a common misconception that you need to invest in individual stocks to be a good stock market investor.

2. Creating a Goals-Based Investment Plan

The decision on which asset class to be invested in, and in what proportions, is an important one. It is called asset allocation. Although it is tempting to dive right into trying to pick out the “best” stocks, it may be appropriate to first take a step back and ask whether stocks are appropriate given your goals.

The next logical question is this: How does one determine asset allocation? Start by determining what the goal or intended use of the money is. To determine your personal investment mix, conduct an examination of your financial goals, risk tolerance, and investment time horizon.

At its core, the asset allocation decision is one regarding your comfort level with the tradeoff between risk versus reward. In investing, risk and reward are intrinsically connected. In order to have the potential for more reward, you have to take more risk. Be leery of investment options that tout “all reward and no risk.” Unfortunately, such an investment may be too good to be true because risk is an inherent part of investing.

A couple of questions worth asking yourself are: What is my goal with this money? When do I need the money? Last, what kind of risk am I willing to take with this money? Then, take these answers and match them up with one or a handful of the available investment options.

It’s may be easier to wrap your noodle around when we consider two different examples of two investors:

Our first investor is saving up for a down payment on a home. They plan to use that money within one year. For them, the risk of losing any money in a potentially volatile investment outweighs the possibility of earning investment returns. Instead of investing, they decide to keep this money in cash, in a savings account.

Next, our second investor. They’re new to investing, with plans to begin investing in a retirement account. They want to focus on growth over the long-term. Because they have a long time horizon for their investments, they have the time to ride through any short-term volatility, so they are more comfortable with the risks of the stock market. They may build out a portfolio that is primarily invested in the stock market, and for diversification purposes, they may decide to include some exposure to bonds as well.

As you can probably tell, there’s no one “right” asset allocation for any one individual, nor is there a universal formula for determining asset allocation. Investors who are learning how to start investing may want to take some time thinking about what allocation makes the most sense for them.

3. Opening an Account

Here’s another common misconception about investing. A Roth IRA and a 401(k) are not investments. These are accounts, just as a brokerage account, that hold investments. Retirement accounts, such as a Roth IRA or 401k, simply have special tax treatment.

Which account you decide on depends on a few factors. First, what are you investing for?

If you are investing for the long-term, then a retirement account may be most appropriate. Retirement accounts can either be opened individually or through your employer. If your employer offers a plan, this could be a good place to start. (And yes, picking funds or a strategy within a 401(k) or 403(b) counts as investing.)

If you are self-employed or do not have a plan through work, you may want to open an individual retirement account. Some options include a traditional or Roth IRA, Solo or Individual 401(k), and SEP IRA.

Because these accounts come with some tax benefits, they also have their own special rules, like when you can withdraw money and limits on how much money can be contributed each year. To determine which type of account that makes the most sense for your personal situation, you may want to speak with a tax professional.

If you would prefer to invest with more flexibility, you may want to open a brokerage or other general-purpose investment account. Though those accounts do not have the tax benefits of a retirement account, they also don’t have restrictions on when the money can be accessed and no penalties for withdrawals before retirement age.

No matter which account type you choose, remember: this is just an account. After opening the account, it will be funded with cash, likely by hooking up an existing checking or savings account. Once the account is funded with cash, that money can be used to buy investments.

If you are opening your own investing account (as opposed to using your workplace retirement plan), you will have to choose a brokerage account or online investing platform. When choosing your account, it helps to pay attention to the fees charged by the platform. Investing costs can dig into your potential returns. SoFi knows that new investors don’t want to pay a bunch in fees just to get in the game. There are no commissions on the SoFi Invest® platform.

4. Deciding How Much to Invest

This may sound oversimplified, but start with whatever you’re comfortable with, knowing that this money will be subjected to some amount of risk. Generally, this should be money that you won’t need in the near-term. That said, one of the greatest features of investing in the modern era is that you can get started with any amount.

There are a few ways to look at this. The first is to consider where you’re at in your own financial journey. It is often recommended that people first work on saving up an emergency fund and paying off credit cards and high-interest debt. And if COVID-19 has taught us anything, it’s that having a firm financial foundation is incredibly important. If you have yet to build up a sufficient safety net or maintain expensive debt on your personal balance sheet, this could be a good place to focus.

It’s easy to get hung up on the “invest versus pay off debt” decision. Here’s a simple place to start: compare interest rates. On debt, it’s the interest rate that you’re paying. On investing, it’s on the interest that you could potentially earn. So for example, if you’re deciding between aggressively paying off a private student loan with a 12% rate of interest or investing at what you expect could be a 7% rate of return, perhaps this makes your decision for you.

That said, it’s not as if you have to be completely debt-free in order to start building wealth. Instead, take some personal inventory. If you feel like you’re missing out on achieving investment and compound returns, then perhaps you’ll want to make investing a priority. If you feel like you’re being weighed down by debt, then maybe you’ll want to give expedited debt pay-off your energy.

If you have arrived at a place of debt repayment that feels manageable, you may want to consider investing as a piece of your overall budget. (Ever hear someone say, “pay yourself first?” This is what they are referring to.) One popular budget, called the 50/30/20 budget, recommends allocating 20% of income towards saving and investing. If you’d like to reach a place of financial freedom sooner than this, then you may want to consider saving more, as a percentage of your overall income.

5. Selecting Investments

Now the fun part of learning how to invest; choosing the actual investments in a portfolio.

Hopefully, you’ve given some thought to which asset class you’d like to invest in. For example, stocks. Then, there are lots of different options to invest within the stock market: You could pick out individual stocks, or stock-based funds, whether mutual funds or ETFs.

With funds, it is possible to invest in categories of the stock market that are very broad, such as the entire global or US stock market, or that are narrower, such as technology stocks. Building simple portfolios of just two or three broad, diversified funds has been a popular method for investors. This is called “passive” or “set it and forget it” investing.

It is also possible to build a diversified portfolio with narrower funds or even individual stocks, but this may require substantial research and curation.

When purchasing funds, investigate whether they are actively managed or indexed. An index fund, as it sounds, mimics some index that measures the performance of the market. For example, a “total US stock market index fund” may be built against the Russell 3000 index, which measures the performance of all stocks in the US. The point is to return whatever the returns of the broader US stock market. Because there is no active manager, the management fee embedded within index funds tends to be lower than the fees on actively managed funds.

Investors opting to buy individual stocks, may want to consider businesses that they believe will produce some sort of future stream of income, either by an increase in the share value or through the dividend payment. Consider reviewing the following: a stock’s price-to-earnings ratio, industry competition, strength of balance sheet, the company research and development, and product pipeline. These factors can help investors determine the value of an investment.

New investors may want to consider buying stocks or ETFs on a platform that offers zero-cost trading, like active investing with SoFi Invest. Fees can eat away at the potential performance of an investment and act as a barrier to entry. Luckily, there are lots of low-cost options for new investors just getting started.

The last option is to use an automated investing service that buys funds for you. This may be an especially compelling option for new investors who want some help building out their first portfolio in a thoughtful, diversified, and goals-driven way. SoFi Invest also offers an automated investing platform.

Be proud of yourself for starting the journey. Invest in a strategy that makes sense for you, starting with any dollar amount.

SoFi Invest is an easy, fast, and no-fee way to get your money working harder for you.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, LLC and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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