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What Is Buying In Bulk?

Buying in bulk means purchasing large quantities of a single product at a lower cost than you’d usually pay for the item. For example, you might buy a six-pack of shampoo for less than the per-unit price you typically spend on a single bottle. Or you might save big by buying a 10-pound bag of grapes instead of the usual one- or two-pounder.

But, like many things in life, buying in bulk has its pros and cons. For instance, you probably have to shell out more upfront to purchase larger quantities, and you might have trouble storing the items or using them up before their expiration date.

Here, you’ll learn more about this topic, including:

•   What is buying in bulk?

•   How much can you save by buying in bulk?

•   What are the pros and cons of buying in bulk?

•   What are tips for bulk shopping?

How Much Is “Bulk”?

How much is bulk doesn’t have an exact answer. There is no specific quantity you need to purchase to have something qualify as bulk buying. Rather, the term means you are buying large quantities of a single item to reap a discount.

That might mean you are buying one jumbo box of cereal (the kind that could feed a cabin full of summer campers) or a 12-pack of regular-size boxes bundled together. You might be buying 36 eggs at a time vs. the usual dozen.

The point is, it’s a larger quantity than what you might find at your local supermarket and at a lower price. And when you buy in bulk and save, you may be helping your overall financial health, too.

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The Pros of Buying in Bulk

A firm financial foundation starts with saving. While the big deal is the potential for saving money on the cost per item, there are other reasons to shop in bulk.

You’re Saving Money

Who isn’t looking for ways to save money daily? If you are wondering, “Does buying in bulk save money?” the answer is usually yes. By buying in bulk, you can likely enjoy a double-digit discount vs. supermarket prices.

You’re Helping the Environment

It can be more socially responsible and environmentally friendly because bulk purchases usually have significantly less packaging per use than smaller purchases have. (Envision a mammoth pickle jar or tub of frosting.)

Ideally, buying in bulk also means you shop less, and that’s less time spent on the road and burning gas.

You May Avoid Impulse Buys

You may rack up additional savings just by being in the store less frequently and having fewer opportunities to pick up things that weren’t on your list. If you’re motivated to save money, avoiding those impulse purchases can be a big plus.

You May Plan and Budget Better

If you’re the organized type who is big on preparing meals in advance, cooking lots of food and freezing it, buying in bulk can make that endeavor easier. That, in turn, can help you take better control of your food budget.

For sure, it’s cost efficient to prepare your family’s favorite pasta dishes and soups and have enough for today and whenever you’re ready for round two or three.

Finding the Price Per Unit

If saving money is important to you, there’s a good chance you want to know exactly how much you are benefiting by buying in bulk. To figure out the real cost you are paying, this is one time you need to do the math. To capitalize on a bulk buy, determine the cost per unit. Sometimes, this number will be listed on the price signage at the store; otherwise, you can use the calculator function on your mobile phone.

•   What is a unit? Think measurements like ounces, square feet, grams, and gallons. For example, a bottle of olive oil is not a unit. A fluid ounce of olive oil is. A roll of paper towels is not a unit. A square foot of paper towels is.

•   Figure out how many units you are buying. Take the total cost of your purchase and divide that by the number of units to get the price per unit.

•   Then compare the unit prices of a few packages of the same product to determine which is the better value.

Ideally, the cost per unit of a bulk buy should be 20% to 35% below what you would normally pay at the supermarket.

Although a supersized item usually has a lower cost per unit than its smaller brethren, crunch the numbers to see.

How Much Can You Save By Buying in Bulk?

No doubt, it can be hard to save money today, and you may wonder whether buying in bulk is worth it. The answer is: It depends. While the amount shoppers save depends on the item, they can anticipate saving around 25% on purchases, according to one recent study across 20 categories of products. Another study found savings of up to 35% at the wholesale clubs vs. supermarkets.

You can also up your savings from buying in bulk by using coupons for those items.

Remember, what’s important isn’t an item’s price but the price per unit.

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3 Tips for Buying in Bulk

When you want to stop spending so much and begin buying in bulk, you need a game plan. It’s a good idea to reach for the familiar and sweeten the deal by looking for familiar items that are also on sale. That will snag you the best prices and help keep your bank account well padded.

1. Stick With What You Know

This is not the time to experiment. If you’re loading your cart with goods, you don’t want to be guessing about whether you’ll love them or not. Go for the family’s beloved items.

Buying in bulk and getting a deal is worthless if nobody wants to eat or use what you buy. That’s money down the drain.

2. Search for Your Favorites on Sale

Don’t want to buy what’s on sale solely because it’s on sale. When trying to cut your grocery bill, the goal is to get what you know and love on sale, not to be overly adventurous. The latter can leave you disappointed, with a few fewer dollars in your pocket to boot.

3. Keep Expiration Dates in Mind

Do check expiration dates when buying in bulk. Items can expire before you get to use them, which is akin to throwing away your hard-earned money. Everything from sunscreen to olive oil can deteriorate when left to sit for long periods because you bought a mega-pack, so shop carefully.

What to Buy in Bulk and What to Avoid

Some products are perfect for stockpiling. While your list will depend on your family, think of items like:

•   Paper towels

•   Toilet paper

•   Tissues

•   Detergent

•   Dishwashing liquid

•   Sponges

•   Aluminum foil and plastic wrap

•   Toothpaste

•   Canned beans and fish

•   Frozen foods

•   Rice

•   Sugar

•   Flour

On the flip side, generally, you don’t want to load up on fresh produce unless you are cooking for a crowd, as your family may not be able to eat it all before it wilts or gets moldy.

The Cons of Buying in Bulk

Buying in bulk can work to your advantage, but it’s not without caveats.

Larger Quantities Can Mean Spending More

Paying $40 for $60 worth of lotion may be a good deal, but what if $40 puts a bigger squeeze on your budget than buying individual bottles one at a time, weeks apart? If you use a credit card in order to buy bulk and save, can you pay off the entire bill when it’s due. If you incur interest charges, that will eat into your “savings.”

You’ll Need Storage Space

Keep in mind, too, that you need space to store all that stuff and a car to pile it in to take home. If either of these are issues, buying in bulk may not be ideal for you.

You May Get Bored With Bulk Products

Know thyself…and your family. Maybe you are the person who gets bored quickly, or your kids will beg for some variety after you’ve bought 24 boxes of the same cereal. When you’ve got mega amounts of the same product, be prepared for the “same old, same old” for a long stretch. That’s all the more reason to purchase only what you love, as you may be using it for months.

You May Have to Pay Membership Fees

If you’re going deep into bulk buying, you likely won’t settle only for what you can get in bulk at the grocery store but will want to shop at the warehouse stores like Costco and BJ’s. Consider the annual membership fees that are required.

Costco’s “Gold Star” membership is $60, and the “Executive” level is $120. BJ’s tiers are $55 and $110. Sam’s Club advertises membership fees of $50 and $110.

Will you frequent the store enough to make the fee worthwhile?

Bulk Quantities Can Lead to Overuse

If you have something in abundance, it’s all too easy to be less conscious of how much you’re using. Knowing you have 12 rolls of paper towel stashed away could lead you to use it up more quickly because you know you have backup waiting.

Bigger Quantities Means Spending More Cash

There’s also the issue that if you’re earning a lower income and/or have considerable debt, you may not be able to come up with enough money to purchase bulk products versus their smaller and less expensive single-use versions. One big purchase could blow your weekly budget. If you spend a chunk of money to buy a mega-pack of toilet paper, can you then afford other necessities?

Products May Expire

Buying in bulk can be a fun way to save money, but don’t get so giddy grabbing great buys that you forget important things like expiration dates. Products like bleach and sunscreen may expire in 12 months or less. And certainly food products can expire as well. Getting a gallon of milk for the same price as a half gallon doesn’t do you much good if it sits in your fridge for so long that it goes bad.

Buying in Bulk at Local Grocery Stores vs Wholesale Retailers

You may wonder if you should buy in bulk at your local grocery store vs. at a wholesale retailer (meaning places like Costco or Sam’s Club). It’s true that you may find good deals at your local supermarket (such as buy two cans of tuna and get two for half-price), and coupons can boost your savings.

However, it’s likely that it will be the occasional or somewhat regularly available items that are worth buying in bulk locally. At a wholesale retailer or wholesale club, the business model is to have bulk quantities always available at good prices. That’s the company’s mission and what gives them bargaining power. In other words, their reason for being is to help customers buy bulk and save.

While you may find great deals at your neighborhood grocery store that encourage you to stock up, you are likely to find smart deals in every aisle of a bulk retailer.

The Takeaway

Buying in bulk has its advantages. Getting a good deal can keep you motivated to save money, but you’ll need to be savvy. Buy only what you need and what you can comfortably store and use in a timely fashion.

As with your local supermarket, temptation likely lurks at bulk retailers. It’s best to know how to compare cost per unit and to prepare and follow a shopping list.

Speaking of planning, you can make your money grow faster, which can help you meet your financial goals, with the right banking partner.

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FAQ

How much do you save if you buy in bulk?

While individual savings will vary, one recent study found that you can save up to 25% by buying in bulk.

Why is it cheaper to buy in bulk?

When you buy in bulk, you are purchasing items that involve less manufacturing and packaging time and materials (aka economies of scale). They may also offer savings on marketing and distribution costs. These price breaks are passed along to you when you buy in bulk.

What are 2 downsides of buying in bulk?

Here are two downsides of buying in bulk: It can involve paying more upfront (say, purchasing 12 boxes of cereal vs. one at a time), and the products can expire or otherwise go bad before you can use them up.


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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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What Is a Shell Company and Why Do They Exist?

Guide to Shell Companies

A shell company, also called a shell corporation, refers to any legally structured corporation that has no meaningful assets or business operations. In popular culture, they’re often used to conceal illegal businesses, or to conceal the owners of a business from law enforcement, the public, or both. However, shell companies themselves are not illegal, and they do have some legitimate uses.

As business entities, shell companies exist to protect, and sometimes to conceal (or at least misrepresent) the assets of the shell company’s owner. But there’s nothing necessarily illegal about shell corporations themselves. It’s important to not only understand the definition of a shell company, but also to recognize how and why they’re used by businesses and people.

How Are Shell Companies Created?

There is more than one way to create a shell company. Most often, the people or corporations that launch new shell corporations use a registered agent in the country where the company will have its legal headquarters. So, in the United States, shell companies would need to register with the Securities and Exchange Commission.

In most countries, the agent must register his or her name, and the name of an owner or a shareholder director. The cost of creating and legally registering a corporation will vary from country to country, from as little as a few thousand dollars to as much as several hundred thousand dollars.

Being “hollow,” by definition, shell companies can do many things. They can open bank and brokerage accounts. They can transfer funds in and out of their home country. They can buy and sell real estate or other companies. And own copyrights and earn royalties on those copyrights.

💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you open an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

3 Uses of Shell Companies

People and corporations use shell companies in a wide range of legitimate businesses for legitimate reasons. Those might be used as a vehicle to raise funds, as a legal entity to attempt to take over another business via a reverse merger, or as a legal entity to give form to a company that intends to go public.

1. Tax Benefits of Shell Companies

Many shell corporations operate in a legal gray area, and it’s possible that corporations and wealthy individuals may use them to avoid taxes.

Many companies have found ways to move their profits to offshore shell corporations to take advantage of less expensive, or more permissive tax regimes in other countries (similar to how some states may be more tax-friendly than others). American corporations might set up shell companies in countries with inexpensive labor, where they have already begun to outsource some of their operations.

Corporations aren’t the only ones that use shell companies to avoid paying taxes. Wealthy individuals around the world may also use shell corporations, domiciled all over the world, to hide their earnings and their wealth from the governments of the countries in which they prosper.

2. Less Risk, More Opportunity

Tax avoidance isn’t the only reason a corporation would set up a shell corporation. It might create a shell company to operate in a country, while protecting its other operations from the legal, political, and financial risks related to that country. That way, if something goes wrong in the country where it operates, the parent company can limit its exposure by existing — at least on paper — offshore.

A corporation may also set up a shell corporation in another country to gain a window into new regions. A business might set up a shell company in Panama or Switzerland to gain access to the local business community, in order to generate contacts and information that would lead it to business opportunities in Latin America or Western Europe.

3. SPACs

While shell companies come up in the news in relation to questionable tax-avoidance schemes, in recent years, they’ve also been mentioned alongside special purpose acquisition companies, or SPACs.

At any given time, there may be hundreds of shell companies that qualify as SPACs — which may be a reason that SPACS were so popular for a couple of years in 2020 and 2021. These are companies formed exclusively to raise capital via an initial public offering (IPO), which will then purchase a company already in operation. SPACs are a type of “blank check company.”

These companies issue an IPO, then hold the money in a trust, until the SPAC management team chooses a company and buys it. And if the SPAC doesn’t find a company to buy, or can’t buy the company or companies it likes within a pre-set deadline — often two years — then the managers promise to liquidate the SPAC and give investors their money back.

Recommended: What Is A Backdoor Listing?

Example Shell Companies

An example of a shell company could be as follows.

Say there’s an entrepreneur that’s looking to raise money before they officially launch a startup — maybe the next big emerging growth company. They may create an LLC, which is a business entity, that doesn’t have any assets or employees. It only exists on paper. But the business entity — a shell company — can be used to store the money being raised for the startup prior to its launch.

In effect, the company itself is merely a shell used to hold cash until it’s ready for use. It’s not really a functional business in the traditional sense.

Shell Companies and Shady Dealings

While there are many legitimate uses for shell companies, as outlined, bad actors also might use them to shield their operations and their assets from authorities. And as different jurisdictions compete for business, new loopholes emerge on a regular basis. In Panama, the British Virgin Islands, Nevada and Delaware, to name only a few, there are strong laws that prevent the government from revealing the beneficial owner of a given shell corporation.

And for creative financiers, there are always new ways to add layers of anonymity, such as phony company directors, who agree to sign their names for a few dollars. Among professionals who specialize in such things, there are ways to find would-be board members, and for countries and states with convenient tax and privacy laws.

Are Shell Companies Legal?

Yes, shell companies are legal, and are most often used for perfectly legal purposes. While they can be used for illegal purposes, a shell company is generally used for a more or less boring or run of the mill business purpose — as discussed in the previous example above.

Shell Companies vs Holding Companies

Though there may be some superficial similarities, shell companies and holding companies are not the same thing. As discussed, shell companies may be formed to serve as empty entities that may be used to take advantage of different taxation regulations, for example. A holding company, on the other hand, is a parent company — holding companies holds or owns other companies within it, like an umbrella. It allows its owners to control numerous businesses without necessarily actively managing any of them.

The Takeaway

Shell companies are legal business entities that are often used for perfectly legal reasons, and often to reduce tax liabilities or store funds. Shell companies can be used for illegal purposes, too, which is what they’re often associated with.

Most investors wouldn’t use shell companies in their day-to-day trading, but they might consider allocating part of their portfolios to a SPAC. It’s important to remember that these are speculative, risky investments, so they don’t make sense for every portfolio.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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FAQ

Is a shell company legal?

Yes, shell companies are legal, and are generally used for perfectly legal purposes. A shell company is simply a business entity that has no assets or employers, or engages in much or any meaningful business operations.

What is an example of a shell company?

An example of a shell company could be an LLC formed by an entrepreneur planning to launch a startup. The entrepreneur files the paperwork to create the LLC, and then uses it simply to store funds until the startup launches, rather than have the LLC engage in any business itself.

What is the difference between a holding company and a shell company?

Holding companies are parent companies, or umbrella organizations, that often have multiple businesses running underneath or within them. Shell companies do not have assets or employees, or any meaningful business operations.


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For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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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What is Scalp Trading?

What Is Scalp Trading?

Scalp trading, or scalping, is a style of short-term trading used with stocks, cryptocurrencies, and other assets. The goal of this trading style is to make profits off of small changes in asset prices. Generally this means buying a stock, waiting for it to increase in value by a small amount, then selling it.

The theory behind it is that many small gains can add up to a significant profit over time. Scalp trading is one of the most popular day trading strategies. Scalping requires a lot of focus, quick decision-making, the right trading tools, and a strategy — and even then, it’s no sure thing. Since traders make many small gains, one big loss could wipe out all their profits.

How Scalping Works in Trading

The goal of scalping is to make many small profits during a trading session. This is the opposite of a buy-and-hold or long term trading strategy, where one hopes to see their portfolio grow over time. Scalpers might make anywhere from 10 to more than 100 trades in a single day, taking a small profit on as many of them as possible. And they might only stay in each position for a few minutes.

With each trade they assess the risk-to-reward ratio with a goal of profiting on more than 50% of their trades. Each win may be small, but the profits can add up over time if they outnumber the losses. Often, scalpers make use of stop losses and leverage when making trades.

Scalp trading reduces risk exposure, since traders only have their money in the market for a short amount of time. It can also be an easier day trading strategy than some others because the goal is to capitalize on small price movements. Small moves happen constantly in the market, and it’s easier to make a profit of a few cents or dollars than a larger amount.

However, any type of day trading involves a significant amount of risk. Scalping is challenging and can result in large losses. This is just one reason why some traders use scalping along with other trading methods.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

Scalp Trading Strategies

There are many different scalp trading strategies, some of which can be used together.

Systematic Planning

Technical analysis helps scalp traders spot trading opportunities and plan exits ahead of time. Traders use one-minute charts, Level II quotes, moving averages, exchange order books, and other tools while scalping. Since positions may be entered and exited within seconds or minutes, five- or 10-minute charts aren’t very useful.

On the Fly

Although fundamental analysis doesn’t play a large role in scalping, it can help to identify stocks that are currently in the news or of interest based on a current event, which may lead to more price movement and trading opportunities. Higher volatility is generally a good sign for scalpers.

Shorting Stocks

Some scalpers also short stocks and sell when they decrease in value. This can be done with the same asset repeatedly, or with different assets throughout a trading session.

Bid/Ask Profiting

Some scalpers prefer to earn profits off of the bid/ask spread rather than actual stock price movements. This takes a significant amount of experience and is a particular trading skill that takes time to learn. It entails looking for trades with a wide spread, meaning a large difference between the broker’s ask price and the price at which a trader buys the asset.

Range Trading

With this strategy, the trader waits for an asset to enter a specific price range before they start trading. Generally, the range is between a support and a resistance level.

Market Making

Market making is when traders post a bid and an offer on a stock at the same time. This only works with stocks that trade a large volume but have low volatility, and the profits are small.

How to Scalp Trade

While there is no one way to engage in scalp trading, these are the general guidelines that scalpers follow to make decisions:

•  Create a watchlist each day based on fundamental analysis and news

•  Trade stocks with enough liquidity that there will be price movement and more options for exit points

•  Quickly sell a stock isn’t increasing in value

•  Make a daily profit goal

•  Set goals for each stock trade and stick to them

•  Buy stocks at breakouts

•  Keep trades short for more chance at a profitable exit

•  Adjust exit points as stocks move.

Pros and Cons of Scalp Trading

Scalp trading is a particular day trading strategy which works well for some people, there are many risks associated with day trading.

Pros of Scalp Trading

•  Small gains can add up to significant returns

•  It reduces risk exposure to market due to short trade times

•  It may be easier than some other day-trading strategies

•  It can be easier to make profitable trades when the goal is to profit off of small movements rather than large price movements

•  There are many trading opportunities, no matter what the market conditions are.

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

Cons of Scalping

•  Even one large loss can cancel out any gains made during a trading session

•  It requires a lot of focus to watch the charts for several hours and execute trades, and can be tedious

•  It requires knowledge and experience with technical analysis

•  Transaction and commission fees can add up quickly if making multiple trades per day—and potentially cancel out profits. It’s key to use a broker that doesn’t charge commissions or one that offers discounts to high volume traders.

•  If traders experience a few losses it can be distressing, and it’s easy to let emotions get in the way of good trading habits. Scalping may be one of the most stressful trading strategies.

•  Scalpers often use margin trading and leverage to increase their positions, which can be very risky.

The Takeaway

Scalp trading, or scalping, is a style of short-term trading used with stocks or other securities. Scalping is best suited for more experienced traders, since it requires an understanding of technical analysis, fast trades, and an understanding of how to set up and execute trades in specific ways.

But scalp trading is just one of many different strategies when it comes to trading stocks and other assets. While trading can seem complex, there are simple ways to get started building a portfolio.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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


SoFi Invest®

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

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

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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How to Help Your Child with SAT Practice

Can you help your child study for the SAT? Yes!

When it comes to gearing up for college, parents can play a major role in supporting their child’s success. Of course, ultimately, it’s the student who’s applying for admission. So, most of the heavy lifting — like practicing for the SAT — will fall to the high schooler. But, as your child goes through the process, you can serve as a couch, cheerleader and time-manager — assisting with test prep, scheduling practice sessions, and maintaining motivation.

Read on for simple guidelines on how you can help your child with SAT practice and help ensure they put their best foot forward on testing day.

Wondering Where to Begin?

You may want to start by familiarizing yourself with the college testing options. The SAT and ACT are the two most widely accepted standardized tests used in U.S. college admissions. Is one a better fit for your child? While similar, there are differences in how each test is structured and scored. For parents and students who want a better feel for the two tests, you can find free online practice assessments for both the SAT and the ACT — including sample questions and scoring.

If you took the SAT back in high school, keep in mind that the test underwent major revisions in 2016. And, in 2021, the College Board (the nonprofit organization that administers the test) dropped the essay and subject tests.

Generally, the College Board advises first-timers to take the SAT in the spring of their high school junior year. This way, they can try again in the fall (if they want or need to improve their score) and still meet most colleges’ application deadlines. Parents can find information about SAT test dates and deadlines, test-center locations, and costs on the College Board site.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

Creating a Plan for SAT Practice

With the exact test and date chosen, parents and students might next turn their focus to SAT practice. Practice can span activities like taking sample tests, understanding the sorts of questions that are commonly asked, and figuring out how the test is scored.

Setting Baseline and Goal Scores

When starting out, many students choose to take a free practice test. This gives them a baseline score and can help identify tough topics they need to brush up on. Practice tests can also help you and your teen pinpoint the specific types of questions that tend to trip them up over and over.

Knowing the practice-test score can help students set an ambitious-yet-realistic goal score for the official test. Other supportive figures on your child’s “SAT team” (relatives, teachers, guidance counselors, mentors, or tutors) can also help them identify an achievable and motivational target score to work towards.

Recommended: ACT vs. SAT: Which Do Colleges Prefer?

Creating an SAT Prep Schedule

Beginning SAT practice earlier can help alleviate your teen’s anxiety in the buildup to the scheduled test. The nonprofit Khan Academy, which partners with the College Board to help students prepare for the SAT, recommends starting test-prep about three months before taking the official test.

Months of SAT practice might seem a tad extreme, but it’s key to remember that some students need longer than others to get up to speed on the subjects covered in the SAT. Building in a cushion of prep time also gives teens ample time to adapt to the standardized test format — allowing them to sniff out the common types of questions asked and get used to the time constraints required by the SAT.

Some students can cram last-minute for the SAT and still earn a solid score. But many of the best test-taking and SAT study strategies call for repeated practice over multiple weeks. Given months instead of a few weeks to get ready, you can set up practice sessions that mimic test-like conditions, encouraging your child to further hone their time-management and concentration skills.

Leading up to the test date, families may also benefit from a shared calendar that includes important SAT deadlines as well as other school, work, and social events. A shared calendar can help students dedicate regular study windows — when they’ll work alone, with a parent, or with a tutor — that won’t clash with prior commitments.

To Push or Not to Push?

Some teens are disciplined studiers and may already have a test-prep routine that works for them. Others might need occasional encouragement (or more concrete guideposts) from a parent or educator to set aside adequate time for SAT practice.

Some students also respond well to personalized pointers provided by a test-prep service or tutor, whereas others value a more DIY or independent approach to SAT prep — perhaps working off a commercial study guide or online testing site. (Khan Academy, for instance, offers tailored practice plans, videos, test-taking tips, and other official content created in partnership with the College Board.) In either scenario, parents can help their child determine which method of test-prep works best with their study habits.

Recommended: College Planning Guide for Parents

What About Paid SAT Prep Services?

When deciding whether to pay for a test-prep service, families may want to ponder a few factors. You might begin by comparing a child’s baseline score (on a practice test) with the goal score they’re hoping for on the actual test day. This might help you decide if investing in a professional SAT prep course would be worth the cost (some services cost hundreds or even thousands of dollars). Another factor to consider is the average SAT scores of applicants at your child’s target schools (compared to their current scoring range).

You might also want to investigate whether any test-prep services are already offered at your child’s school or any local educational organizations, which may be free or low cost.

When looking at paid prep services, you may want to consider the best study conditions for your student’s personality and academic strengths — some approaches offer more guidance, while others stress independent practice.

Also consider: Would your child benefit from a structured schedule and in-person classes? Or, would they prefer a more independent study approach? You might want to consult with a guidance counselor or teacher for input before signing up and paying for a private SAT prep service. Family friends with children already in college might also offer an opinion based on their previous experience. (But, be sure to double-check this advice with any recent changes to the SAT.)

Recommended: Ultimate College Application Checklist

What Else Can Parents Do for SAT Practice?

Perhaps the most important role parents can have in helping their children prepare for the SAT is to do what they’ve always done — and that’s to support and encourage their child’s growth. Here are some ways parents might motivate students, helping them to stay on track toward that college-admission goal.

Avoid Adding to the Stress

Students can feel a great deal of pressure when preparing for the SAT. They may fret about disappointing their parents’ or teachers’ expectations. Some might dread feeling embarrassed if they score lower than a sibling or classmates. And, if a student has dreamed about attending a specific college or pursuing a precise career path, they may worry that the “wrong score” will sabotage their future plans.

Given the potential for SAT practice to turn into a psychological pressure-cooker, you may want to remind yourself that your words and deeds can lessen or intensify a child’s stress. Raising “concerns” about your teen’s current scores and/or pushing your child to excel or “do better” could increase your child’s test anxiety (and potentially make it harder for them to learn new material).

To minimize the at-home testing drama, you may want to avoid showing disappointment or frustration about practice test scores. It may be more helpful to celebrate incremental successes during weekly or daily practice sessions — honoring the progress being made towards the goal, not the distance still left to run. Gentle reminders that it’s possible to retake the SAT might also reduce a child’s overall testing anxiety.

Encouraging Healthy Habits

Studying late into the night or having a jam-packed schedule can leave high schoolers feeling burnt out. To avoid SAT practice burnout, consider instituting a regular “timeout” from test prep — whether it’s a quick snack break or carving out down time for a walk around the block. Parents can help kids stay healthy by providing nourishing meals, scheduling time for exercise and other social activities, providing plenty of water and nutritious snacks, and helping their teens get ample rest each day.

Recommended: 10 Ways to Prepare for College

Providing a Good Study Space

To help your child set up a focused study environment, you’ll want to first identify a quiet space for studying and practice sessions. Next, you can help your child gather all the study guides, calculators, pencils, paper or computers they’ll need to prep.

In addition, you may want to encourage your child to download an SAT prep app — this will allow them to practice during free time or when they’re riding the bus. Many apps offer practice problems or a “question of the day.” If time is tight, a student can still squeeze in some studying in down moments.

Recommended: How Much Does GPA Matter When Applying to College?

Keeping Things in Perspective

Parental pep talks can help test-engrossed students to keep things in perspective. Although an SAT score is a significant factor in many college admissions decisions, it’s not the only (or primary) factor universities take into consideration when evaluating applicants. Most admissions committees review a student’s academic record, school and community involvement, personal statement, and letters of support.

Some schools have even moved to a “test optional” admissions policy in recent years. This means students are not required to submit an SAT or ACT score with their application. Open communication about the college admissions process can help students to focus on the short-term tasks at hand.


💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

Getting Started

The SAT isn’t the only aspect of college planning students might want or need help with. You may be enlisted to lend a hand with researching schools to apply to, choosing a major, making college visits, and proof-reading essays and applications.
Your child will also likely need your financial help to cover the cost of attendance at their selected college. Fortunately, both students and parents have a number of resources that help make college more affordable, including financial aid.

To apply for financial aid, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). This will let you know if you are eligible for aid, which comes in the form of grants, scholarships, work-study, and federal student loans (which may be subsidized or unsubsidized). If those do not cover your costs, you may be able to fill in the gaps with a private student loan.

Private student loans are available through private lenders, including banks, credit unions, and online lenders. Rates and terms vary, depending on the lender. Generally, borrowers (or parent cosigners) who have strong credit qualify for the lowest rates.

Keep in mind, though, that private loans may not offer the borrower protections — like income-based repayment plans and deferment — that automatically come with federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.



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Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).


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


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

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Averaging Down Stocks: Meaning, Example, Pros & Cons

Averaging down stocks refers to a strategy of buying more shares of a stock you already own after that stock has lost value — effectively buying the same stock, but at a discount. In other words, it’s a way of lowering the average cost of a stock you already own.

It’s similar to dollar-cost averaging, where you invest the same amount of money in the same securities at steady intervals, regardless of whether the prices are rising or falling.

While this strategy has a potential upside — if the stock price then rises again — it does expose investors to greater risk.

What Is Averaging Down?

By using the strategy of averaging down and purchasing more of the same stock at a lower price, the investor lowers the average price (or cost basis) for all the shares of that stock in their portfolio.

So if you buy 100 shares at one price, and the price drops 10%, for example, and you decide to buy 100 more shares at the lower price, the average cost of all 200 shares is now lower.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Example of Averaging Down

Consider this example: Imagine you’ve purchased 100 shares of stock for $70 per share ($7,000 total). Then, the value of the stock falls to $35 per share, a 50% drop.

To average down, you’d purchase 100 shares of the same stock at $35 per share ($3,500). Now, you’d own 200 shares for a total investment of $10,500. This creates an average purchase price of $52.50 per share.

Potential of Gain Averaging Down

If the stock price jumps to $80 per share, your position would be worth $16,000, a $5,500 gain on your initial investment of $10,500. In this case, averaging down helped boost your average return. If you’d simply bought 200 shares at the initial price of $70 ($14,000), you’d only see a gain of $2,000.

Potential Risk of Averaging Down

As with any strategy, there’s risk in averaging down. If, after averaging down, the price of the stock goes up, then your decision to buy more of that stock at a lower price would have been a good one. But the stock continues its downward price trajectory, it would mean you just doubled down on a losing investment.

While averaging down can be successful for long-term investors as part of a buy-and-hold strategy, it can be hard for inexperienced investors to discern the difference between a dip and a warning sign.

Why Average Down on Stock

Some investors may use averaging down stocks as part of other strategies.

1. Value Investing

Value investing is a style of investing that focuses on finding stocks that are trading at a “good value” — in other words, value stocks are typically underpriced. By averaging down, an investor buys more of a stock that they like, at a discount.

But in some cases, a stock may appear undervalued when it’s not. This can lead investors who may not understand how to value stocks into something called a value trap. A value trap is when a company has been trading at low valuation metrics (e.g. the P/E ratio or price-to-book value) for some time.

While it may seem like a bargain, if it’s not a true value proposition the price is likely to decline further.

2. Dollar-Cost Averaging

For some investors, averaging down can be a way to get more money into the market. This is a similar philosophy to the strategy known as dollar-cost averaging, as noted above, where the idea is to invest steadily regardless of whether the market is down or up, to reap the long-term average gains.

3. Loss Mitigation

Some investors turn to this strategy to help dig out of the very hole that the lower price has put them into. That’s because a stock that has lost value has to grow proportionally more than it fell in order to get back to where it started. Again, an example will help:

Let’s say you purchase 100 shares at $75 per share, and the stock drops to $50, that’s a 33% loss. In order to regain that lost value, however, the stock needs to increase by 50% (from $50 to $75) before you can see a profit.

Averaging down can change the math here. If the stock drops to $50 and you buy another 100 shares, the price only needs to increase by 25% to $62.50 for the position to be profitable.

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

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

Pros and Cons of Averaging Down

As you can see, averaging down stocks is not a black-and-white strategy; it requires some skill and the ability to weigh the advantages and disadvantages of each situation.

Pros of Averaging Down

The primary benefit to averaging down is that an investor can buy more of a stock that they want to own anyway, at a better price than they paid previously — with the potential for gains.

Whether to average down should as much be a decision about the desire to own a stock over the long-term as it is about the recent price movement. After all, recent price changes are only one part of a stock’s analysis.

If the investor feels committed to the company’s growth and believes that its stock will continue to do well over longer periods, that could justify the purchase. And, if the stock in question ultimately turns positive and enjoys solid growth over time, then the strategy will have been a success.

Cons of Averaging Down

The averaging down strategy requires an investor to buy a stock that is, at the moment, losing value. And it is always possible that this fall is not temporary — and is actually the beginning of a larger decline in the company and/or its stock price. In this scenario, an investor who averages down may have just increased their holding in a losing investment.

Price change alone should not be an investor’s only indication to buy more of any stock. An investor with plans to average down should research the cause of the decline before buying — and even with careful research, projecting the trajectory of a stock can be difficult.

Another potential downside is that the averaging down strategy adds to one particular position, and therefore can affect your asset allocation. It’s always wise to consider the implications of any shift in your portfolio’s allocation, as being overweight in a certain asset class could expose you to greater risk of loss.

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

Tips for Averaging Down on Stock

If you are going to average down on a stock you own, be sure to take a few preparatory steps.

•   Have an exit strategy. While it may be to your benefit to buy the dip, you want to set a limit should the price continue to fall.

•   Do your research. In order to understand whether a stock’s price drop is really an opportunity, you may need to understand more about the company’s fundamentals.

•   Keep an eye on the market. Market conditions can impact stock price as well, so it’s wise to know what factors are at play here.

The Takeaway

To recap: What is averaging down in stocks? Simply put, averaging down is a strategy where an investor buys more of a stock they already own after the stock has lost value.

The idea is that by buying a stock you own (and like) at a discount, you lower the average purchase price of your position as a whole, and set yourself up for gains if the price should increase. Of course, the fly in the ointment here is that it can be quite tricky to predict whether a stock price has simply taken a dip or is on a downward trajectory — so there are risks to the averaging down strategy for this reason.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


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


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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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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