InvestZ Archives | Page 96 of 160

Sep

2023

Advance/Decline Line: Definition, Formula, Examples

By Paulina Likos | Growing Wealth, invest, Investing, Terminology | Comments Off

The Advance/Decline line, or A/D line, is a technical stock market indicator used by traders to measure the overall health of the stock market. This measurement tells market participants whether there are more stocks rising or falling on a trading day, and whether a majority of stocks are pushing the market in either direction.

For traders who are looking for greater insight into market trend analysis, the A/D line may be a suitable indicator to help determine where the market is trending, how strong that trend is, and the direction the market could be going in the short-term.

What Is the Advance/Decline Line (A/D)?

The advance/decline line (A/D) is a market indicator that traders use during stock technical analysis to estimate the breadth, or the overall strength or weakness of the stock market. The A/D line monitors how many stocks are currently trading above or below the previous day’s close. Traders may follow these changes over time to try to forecast the direction of the market.

In a particular index, like the S&P 500, Nasdaq, or Dow Jones Industrial Average, stocks go up and down. But just because some stocks move in one direction, it doesn’t mean that all stocks move in that same direction. Sometimes it can be difficult for investors to discern whether the direction of the market is being influenced by larger stocks that hold more weight in an index, or by a majority of stocks that are pushing the markets in a particular direction.

The purpose of the A/D line is to see how it correlates with the price movement of the index it’s being compared to. Traders and investors can use the A/D line to see how many stocks are rising or declining to form an estimate on market direction.

Where Is the Advance/Decline Line on a Chart?

Market participants can find the advance/decline line above or below a stock index chart. Investors can reference the A/D line and compare it to the chart stock market indexes to better understand the strength of the market and to help gauge the direction of where the market might be headed.

Advance/Decline Line vs the Arms Index

The Arms Index — also known as the story-term trading index (TRIN) — is another technical analysis indicator used to estimate market sentiment and measure volatility. It’s a ratio between advancing and declining stocks versus the volume of stocks whose price increases or decreases. In other words, the TRIN compares advancing and declining stocks to their volume and shows whether the volume is flowing toward advancing or declining stocks.

If more volume is trending toward declining stocks, the TRIN for that day will be greater than one. If more A/D volume correlates with advancing stocks, then the TRIN will be below one for that day. A high TRIN reading could signal to traders that stock selling may be on the horizon. A TRIN reading below one could indicate a buying opportunity.

Traders may use the TRIN ratio as a short-term market gauge to measure overbought or oversold market levels, while the A/D line can be used to gauge longer term market sentiment by measuring the rise and fall of stock over a period of time.

💡 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.

Advance/Decline Line Formula

The A/D Line is calculated by taking the difference between the number of stocks that advance and the number of stocks that decline, compared to the prior close. This value is added to the previous day’s A/D Line value. If there are more declining stocks versus advancing stocks on a particular day, then traders will see the A/D line start to move downward. If there are more stocks that are advancing, the A/D number is going to be increasing. Here is the formula:

Advance/Decline Line = Number of advancing stocks – Number of declining stocks + Previous A/D Line value

Calculating the Advance/Decline Line (A/D)

The A/D line is a cumulative, daily calculation that is plotted each day so market participants can see the direction of where stocks are moving. When reading the A/D line, it’s important for traders to look at the direction of the line and not its value.

Traders may use the A/D line to help decide which trades to place next. For example, if the market shows more declining stocks than advancing stocks, this means a majority of stocks closed at a lesser value than their previous day close. As a result, traders may anticipate that the market will fall in the near term, and may choose to sell because the market trend is moving in a bearish direction.

Some indexes, like the S&P 500, are market-cap weighted, which means the larger companies hosted in the index influence the direction of the index. The A/D line allows investors to look at stocks on a level playing field. When a market rises, for example, the A/D line shows investors whether this rise was driven by a majority of stocks increasing or if the rise was caused by a select few of stocks that hold a larger weight in the index.

What Does the Advance/Decline Line Show?

The advance/decline line shows traders the degree of participation of stocks in a market that is either rising or falling and whether the majority of stocks are moving in a similar direction of the market.

The line is a representation of stocks that are ticking up or down cumulatively, adding stock movements each day to see the trend of advancing stocks vs. declining stocks. If there were more declining stocks than advancing stocks on a particular day, the A/D line would start to slope downward. If there were more advancing stocks than declining stocks on the day, then the A/D line would slope upwards.

Sometimes there might be a difference in direction between the index and the A/D line. This is called a divergence, and it can happen in one of two ways.

Bearish Divergence: Declining Line

If the index is on an upward trend but the A/D line has a negative slope, this is known as a bearish divergence. The increase in the index may be driven by some stocks, but this scenario signals to traders the market may reverse and trend downward in the short term.

Bullish Divergence: Rising Line

If the index is on a downward trend but the A/D line has a positive slope, this is called a bullish divergence. The index seems to be bearish, but the A/D line tells market participants there are more advancing than declining stocks during the period that the index is declining. This may signal a trend reversal in market prices and indicate the market has more strength than meets the eye.

Example of Using the A/D Line

Traders use the A/D line to compare it to the price movement of the index.

For example, when an index you’re monitoring is moving to new highs, you want to see the A/D line moving new highs to confirm the index’s direction.

If the index and the A/D line are both hitting new highs, the market is hitting a bullish trend. If the stock market reaches a new peak but the A/D line reaches a lower peak than the previous rally, that means fewer stocks are participating in a higher move and the rally could be coming to an end. This could suggest that the strength of the market is driven by a few names with larger market caps.

Is the A/D Line a Good Indicator?

The A/D line is considered a reputable and popular measurement for traders to gather reliable insight into the strength of a market trend. Note that there are many market indicators out there, and each will have good and bad use cases. But generally, the A/D line may be a good choice for many investors to utilize.

When the price of an asset changes, traders will want to know whether it’s best to buy or sell. With the A/D line, traders can estimate price trends of assets and potential reversals by reviewing the direction of the A/D line, which is considered to be a reasonably reliable indicator in predicting trends since it shows market participants how the market is behaving.

Pros of the A/D Line

Traders can find the A/D Line indicator either above or below a stock chart on a trading platform and may use it as a tool to try to time the market and potentially catch a particular stock price.

By gauging the direction of where markets are headed, the A/D Line can help traders forecast stock price movements on the upside or downside. This may help market participants position their trades favorably.

Cons of the A/D Line

It’s important for market participants to be careful to not rely on the A/D Line as their only market indicator. While the A/D Line offers insight into overall market direction, it may not be able to capture minor market changes.

The A/D Line does not capture price changes between trading gaps, or when a stock’s price moves higher or lower throughout the trading day even though there’s not much trading going on.

Another limitation is that even though the line shows the general direction of where the market is trending, either a positive or negative slope, the A/D line doesn’t show the precise percentage the stock moved.

How Investors Can Use the Advance/Decline Line

The A/D line is positioned against an index to help spot market trends and reversals. Traders who trade on the major indexes can use the A/D line to gauge overall market sentiment. Market participants can look at a historical A/D line to see how the market performed in different periods of time.

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

The Takeaway

The Advance/Decline Line is a tool used by traders and investors to forecast the direction of where the overall stock market is headed. The A/D Line is a well-known market indicator used to predict and confirm trends and forecast market reversals.

The A/D Line offers a great visual guide that may help traders make decisions on market strategies and positions in the short term. But while there are benefits of using this metric, it’s important for market participants to know the A/D line’s drawbacks as well.

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FAQ

What is considered a good Advance/Decline ratio?

An advance/decline ratio of one or more is generally considered to be good, as it’s a signal that a stock is in a stable or on an upward trend. Conversely, a ratio of less than one is a sign that it could be declining.

What is the 10-day Advance/Decline line?

The 10-day advance/decline line is a technical indicator that allows investors to get a measure of the average number of daily advancers minus decliners within an index or specific sector over the previous ten trading days.

What does a period of decline in investment mean?

A period of decline in investment is a broad description of a period of deflation in the investment market. It could take the form of an overall drop in the value of investments.

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Sep

2023

25 Ways to Find Affordable Housing

By Jamie Cattanach | Budgeting & Goals, Financial Independence, money | Comments Off

Getting your own place (whether with a roommate or not) versus living on campus or with Mom and Dad is a major rite of passage. But not only does it signal a new level of independence, it can also take a big bite out of your budget.

To get the most for your money, especially in a competitive market, it can be wise to try a variety of techniques, from using little-known apps to searching smarter. These tricks can help you snag a good deal.

Here, you’ll learn some of the top ways to find affordable housing and enjoy your own space.

How to Find a Cheap Place to Live

Check out our 25 strategies for sussing out a space you can not only afford but actually want to live in.

1. Searching Craigslist

Craigslist may be an oldie, but it can still be a goodie for finding affordable housing options. You can filter your search by putting in your maximum price on the left-hand side of the screen. You may also want to check out the “rooms & shares” category to find a place with roommates.

2. Browsing Zillow

Zillow isn’t just for home-buyers; it can also be a great resource for renters. You may want to download the app and also sign-up to get alerts on apartments in your area that are in your price range.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.00% APY, with no minimum balance required.

3. Asking Your Friends

Digital listings aren’t the only way to look for a great new place. Your friends can also be a great resource for figuring out where the best apartments are, especially if you know they’re not spending an arm and a leg on their living situation.

4. Asking your Friends to Ask Their Friends

You can expand your word-of-mouth circle exponentially by asking your friends to ask their friends for intel on available and affordable housing. You might also be able to find folks who are actively looking for a roommate or someone to take over their lease.

5. Checking PadMapper

PadMapper ’s tagline — “Making Apartment Hunting Suck Less” — is on point. Searches on this site are quick and easy, and their verification feature can also help you avoid too-good-to-be-true housing scams, which can be a problem on some other sites.

6. Teaming up with a Pal

If you find out that a friend is also on the hunt for new digs, you may want to consider joining forces and finding a place together. You’ll not only be able to split the rent, but also the cost of food, supplies, and furnishings.

7. Hitting the Pavement

Whether it’s by car, bike, or even on foot, you can often learn a lot about the local rental market by touring the neighborhood. You might spot an appealing apartment complex you never noticed before, or see a “For Rent” sign on a multi-family house or single-family house that has a room, mother-in-law suite, or garage for rent.

Recommended: Single Family vs. Multi Family House

8. Keeping an Eye on Apartments.com

Apartments.com is a comprehensive apartment rental resource. In addition to helping you find a rental, you may also be able to use the site to sign your lease and even pay your rent. That can help simplify your money management.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

9. Keeping an Ear out at Work

Your coworkers might have insight into where the best local housing rentals are, or even know of someone who is looking for a roommate. You may, however, want to proceed with caution before moving in with a coworker (depending on your roles, living with a colleague could potentially cause awkwardness at work).

10. Using Bungalow

If you’re open to sharing a living space, along with expenses, you may want to check out Bungalow. The platform, which is devoted to helping people find affordable co-living arrangements, can help match you with roommates who have similar living preferences.

11. Moving to a Cheaper City

If you live in an expensive city and your work allows you to relocate or you’re on the hunt for a new job and a change of pace, you might consider moving to one of the more affordable cities in the U.S. A cheaper city may not only have lower rents, but also a lower cost of living in general.

Recommended: Cost of Living Index by State

12. Searching Rentable

Rentable (formerly ABODO) is now available in over 300 cities and makes it easy to search local housing options in your price range. In addition to price, you can apply a wide range of other search filters to help you hone in options that might work well for you.

13. Looking in a Less Trendy Neighborhood

Another way to find affordable housing is to cast a somewhat wider net. Even if you want to stay put in your current locale, even moving a mile or two can make a big difference when it comes to your monthly rent. While you might not be as close to your favorite bars and restaurants, you could end up having more money to actually spend in those places. The cost of living could be lower due to school district divisions or other factors.

14. Hopping on Hotpads

In addition to helping you find rentals in your preferred location, HotPads will also suggest options in other, similar neighborhoods that you may want to consider. This can potentially yield deals you wouldn’t have looked for, or found, on your own.

15. Checking out Local Bulletin Boards

Yes, bulletin boards are still a thing, even in the digital age. Next time you’re at a local coffee shop or other popular hangouts, you may want to poke around and see if there is a corkboard. You never know what you might find being advertised, including an affordable place to live that will help you stay on budget.

16. Poking Around on Reddit

With all the social media options these days, it can be easy to forget about Reddit. But it might be worthwhile to go to the subreddit for your city. You may be able to write a post asking if anyone has tips on where to look for nice, affordable apartments. (You may want to first check the rules in the sidebar to make sure such posts are allowed — every Reddit community has its own guidelines.)

17. Reaching out to Facebook Communities

Your favorite local Facebook community might be able to provide some insight on where to find the best affordable housing. If the group is focused on a shared interest, you might also be able to find a potential (and like-minded) roommate within the community to split expenses with.

18. Looking During the Winter

Moving in cold, miserable weather may not be ideal. However, you might be able to score a more affordable apartment during the winter months, when there is typically less competition for apartments.

19. Trying Trulia

With dozens of search filters, Trulia is another apartment search site that is worth checking out, especially if you’re a pet owner. The site highlights whether or not a rental is pet-friendly right on the listing’s thumbnail.

20. Considering a Job that Comes with Housing

One affordable way to live in the city of your choice is to find a job that offers free or reduced-priced accommodation, such as being a building manager/superintendent, park ranger, hotel worker, groundskeeper, nanny, or live-in caregiver.

21. Accessing Apartment List

Here’s another idea for finding an affordable place to live: Apartment List not only lists apartments for rent in all 50 states, but also offers a handy “rent calculator.” You can input where you’re moving, how many bedrooms you need, and your monthly gross income (before taxes), and the site will help you find apartments for rent in your area that will work with your budget.

22. Checking Walk Score (Especially if You Don’t Have a Car)

Walk Score can be a valuable resource for renters who don’t have a car. The platform gives every property listing a “Walk Score” to make it easy for people to evaluate walkability and access to transportation when choosing where to live. If you move to a very walkable location, you may be able to avoid owning a vehicle or have more time to save up for a car.

23. Posting Your Own Classified

Prefer to be in the driver’s seat? Rather than just responding to ads, you might want to consider placing one on a free platform like Craigslist. You can give potential landlords or roommates more information about yourself up front, which could lead to a more fitting (and affordable) living scenario.

24. Considering a Sublet

If you’re looking for a short-term rental, or you’re not averse to potentially having to move again, you may want to consider a sublet. Going this route could help you find a nice place at below market-value rent, since the owner or original renter may be under the gun to find a replacement.

25. Getting out of Town

If you live in or near a major city and you’re committed to a more affordable living situation, you may want to consider heading to a more rural area. Housing can be substantially cheaper in, say, South Dakota than it is in San Diego or at the farther reaches of a commuter zone around the city you’re targeting. The rise of flexible and remote work is making escaping the city more achievable.

Worth noting: If you want to buy your own place, you might qualify for a USDA loan in some rural areas, potentially making homeownership more affordable.)

The Takeaway

Finding a nice, yet affordable place to live isn’t always easy. To increase your odds of success, you may want to use multiple online rental platforms, network with friends and coworkers, be open to different locations, and even walk the streets of your target neighborhoods to scout out opportunities.

As you search for hidden gems, you may also want to start saving money to cover your start-up expenses, which could include the first and last month’s rent plus a security deposit. That way, when a great deal comes your way, you can jump on it. A high-interest, fee-free bank account can be a good option.

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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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Sep

2023

Unit Investment Trust (UIT) Explained Easily

What Is a Unit Investment Trust (UIT)?

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

A unit investment trust, or UIT, is similar to a mutual fund in that it’s a type of investment company that can hold a variety of securities, like stocks and bonds, that investors can buy as redeemable units. In fact, UITs belong to the same category as mutual funds and closed-end funds, in that they pool money together from different investors.

Similarly, unit investment trusts are designed to provide capital appreciation and/or dividend income, although without active trading of the securities in the portfolio. Unit investment trusts can offer some advantages to investors compared to mutual funds or exchange-traded funds (ETFs). There are, however, some potential downsides that could make them less attractive than other types of pooled investments.

Unit Investment Trust (UIT) Explained Clearly

A unit investment trust is a type of investment company that issues and invests in securities. The other two types of investment companies are open-end funds (i.e. mutual funds) and closed-end funds.

Similar to a closed-end fund, a UIT raises money from multiple investors, typically through an Initial Public Offering, or IPO. Each investor holds a unit in the trust that represents an ownership share and allows them to stake a claim to any capital appreciation or dividend income the trust generates. This type of trust can be established as a grantor trust or a regulated investment corporation.

Once the portfolio manager of a unit investment trust chooses which securities to invest in, the investment focus usually doesn’t change. That means there is typically no active investing management in terms of trading the underlying assets. The investments that a UIT chooses depend on its overall strategy and objectives. So, the risk and return profile of unit investment trusts can vary from one to another, based on the underlying holdings.

When a UIT matures, investors can do one of three things:

• Wait for the trust to liquidate its portfolio and receive their share of the proceeds

• Roll the investment over to a new UIT

• Receive a like-kind distribution of stock from the trust’s underlying investments

It’s important to keep in mind that UITs are not guaranteed investments. So, it’s possible that returns could be lower than expected or even negative if the trust fails to meet its objectives.

UIT Advantages and Disadvantages

Like any investment UITs have their advantages and disadvantages. As for advantages, investors may like that UITs offer a relatively easy way to diversify their portfolios with a single investment. They’re relatively easy to understand, too, and offer a degree of transparency into their holdings, so that investors can make better decisions relating to their investing strategy.

As for disadvantages? Perhaps the most obvious is that UITs are more or less fixed investments that do not change their investment mixes in an effort to adjust to the whims of the market. Some investors may prefer a more active approach to management in an effort to increase their returns.

Types of Unit Investment Trusts

Unit investment trusts can invest in a variety of different securities, but they tend to concentrate holdings in stocks and bonds. UITs generally come in one of two forms: Stock trusts and bond trusts.

These assets are held in the trust for a set time period until the trust is dissolved. A typical holding period would be anywhere from 15 months to two years, though some UITs may have an end date that’s farther in the future.

Investors can sell their holdings back to the issuing company at any time, but they can’t trade UIT shares as they would shares of a mutual fund.

💡 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.

UIT vs. Mutual Fund

UITs differ from most mutual funds several ways, chiefly in that they sell a fixed number of shares or units when the UIT is first opened; and the trust has a set maturity date when the UIT is dissolved and investors can redeem their units.

As noted, a mutual fund is a company that pools money from investors and invests them in securities. There are many different types of mutual funds, including but not limited to bond funds, stock funds, blended funds, target-date funds, and index funds. Some mutual funds can be actively managed while index funds follow a passive investing strategy.

At first glance, a UIT and a mutual fund might seem like the same thing since they fall under the same investment company umbrella. And while they do have some features in common, there are other things that distinguish the two.

How Are UITs and Mutual Funds Similar?

UITs and mutual funds share common ground when it comes to diversification, regulation, and how they pass on capital gains or dividends to investors. A capital gain represents a gain between the price you initially paid for an investment and the price you receive when you sell it. A dividend is a percentage of an investment’s profits that are paid out to investors.

Since UITs and mutual funds are both types of investment companies, they’re subject to SEC regulation. This means they’re required to meet regular reporting requirements. While this can help to minimize the potential for fraud, investors are still encouraged to read each fund’s prospectus to ensure they understand what the fund invests in.

Recommended: How Do Dividends Work?

What Are the Differences Between UITs and Mutual Funds?

The biggest differences between UITs and mutual funds concerns their structure and management. A UIT has a set beginning when shares are issued, and an end date when it matures — while an open-end mutual fund typically allows investors to continually buy and sell shares. Additionally, a unit investment trust issues a certain number of units when the trust is created while mutual funds can issue new shares periodically.

With UITs, the underlying investments remain largely or entirely the same until they mature. Mutual funds, on the other hand, can buy and sell underlying assets as needed to stay aligned with the fund’s objectives. So, mutual funds can be more adaptable if an underlying investment doesn’t perform as expected.

How to Invest in UITs

If you’re interested in investing with a unit investment trust, it’s possible to buy them directly from the issuer. UITs can also trade on an exchange, so you could purchase them through an online brokerage account.

Before buying a unit investment trust, however, there are a few things to consider. Specifically, look at the following when comparing UITs:

• Duration of the UIT

• Minimum investment requirement

• Underlying investments

• Investment strategy and objectives

• Fees

Also, consider the investment risks. Again, there’s no guarantee that a unit investment trust will perform as expected. And since the trust investments are fixed, your returns (or losses) more or less hinge on whether those investments do well.

It’s also important to think about how well the underlying investments match up with the other investments in your portfolio. If you’re already heavily concentrated in equities, for example, it may not make sense to choose an equity UIT since that could increase your exposure to some of the same companies. A bond UIT, on the other hand, might help to balance out your asset allocation.

Investment Costs

Don’t forget that investments often have associated costs, and they can come in a variety of forms. For instance, investors may be on the hook for broker fees, trading fees, management fees, and more. The specifics will depend on the individual investment, but investors should do some homework to see what potential investment fees they’re up against.

Unexpected Taxes

Taxes often catch investors by surprise, too. Be sure to review what types of taxes you might be on the hook for – with investments, it’s generally either income taxes or capital gains taxes – and plan accordingly.

Are UITs a Good Investment?

Whether a unit investment trust is a good investment for you personally can depend on what you need and expect a pooled investment to do for you.

If you’re an active trader, for example, then a UIT likely wouldn’t be a good fit. On the other hand, if you tend to take the longer view when investing or you prefer a buy-and-hold approach, you may find a unit investment trust fits well in your investment portfolio.

While you could benefit from capital gains distributions and dividends, keep in mind that unit investment trusts offer less flexibility than mutual funds or ETFs. Dividends, for example, can’t be reinvested the way they could with a mutual fund or index fund.

And, as discussed, investment fees are another important consideration when investing in a UIT. Since investment costs can reduce total return amounts over time, it’s important to understand all the costs associated with buying units and redeeming them when the trust matures.

Should You Consider Investing in a Unit Investment Trust?

Given their less flexible structure and set maturity date, unit investment trusts may be appealing to investors who take a longer-term approach and tend to prefer a buy-and-hold strategy.

If you’d like more flexibility with your investments, you may consider mutual funds or ETFs in place of UITs, which have a set beginning and end date and little or no active trading of the securities within the trust. You also might want to explore alternatives to trusts or funds, like cryptocurrency or investing in IPOs.

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

The Takeaway

A unit investment trust, or UIT, are investment companies that are, in many ways, similar to a mutual fund. They can hold a variety of securities, like stocks and bonds, that investors can buy as redeemable units.

Given their less flexible structure and set maturity date, unit investment trusts may be appealing to investors who take a longer-term approach and tend to prefer a buy-and-hold strategy. If you’d like more flexibility with your investments, you may consider mutual funds or ETFs in place of UITs, which have a set beginning and end date and little or no active trading of the securities within the trust.

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

FAQ

Are fixed unit investment trusts redeemable?

Unit investment trusts do issue redeemable shares or units, much like a mutual fund. As such, the UIT is able to purchase shares or units back from an investor at an appropriate valuation.

What is the difference between unit trust and investment trust?

A unit trust is a sort of investment fund that allows investors to pool their money for investment purposes. An investment trust is a company or entity that operates an investment fund.

Are UITs actively managed?

UITs are not actively managed, and have fixed investment holdings. Accordingly, investments are purchased at the onset, and held until the UIT matures.

Photo credit: iStock/Ridofranz

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

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Sep

2023

Should You Sign a Cohabitation Agreement With Your Partner?

By Janet Siroto | Budgeting & Goals, Life & Career, money | Comments Off

Do you live with your romantic partner but aren’t hitched? Or did you and your significant other just decide to move in together? If so, it could be worth considering whether you’d like to both sign what is known as a cohabitation agreement.

Of course, sharing a household can bring many benefits. But there are also complicated situations that can emerge and some financial and legal risks.

A cohabitation agreement is a mutually agreed-upon document that helps protect you legally and make sure that both members of the couple are aligned on key aspects of living together. It also typically covers what would happen if you two decided to split up.

Here, you’ll learn the definition of a cohabitation agreement, what it covers, and key considerations when you and a partner decide to share a home.

What Is a Cohabitation Agreement?

Also known as a living together agreement, non-marital contract, or “no-nup,” a cohabitation agreement is a legally binding contract signed by two people who live together or are planning to move into the same home.

Like a prenup or postnup agreement, a cohabitation agreement is designed to address the variety of personal and financial issues you and your partner may face in the event of an emergency or a breakup, such as who will retain ownership of property acquired before the relationship started and who will keep property purchased together.

This formal agreement not only protects assets that you bring into the relationship, but can also be a way to ensure clarity during your relationship and help you and your partner start talking about money.

Your cohabitation agreement might, for example, detail how living expenses will be divided or whether your money will be kept separate, fully combined, or partially combined.

A cohabitation agreement can also include health care directives and address issues involving your children or children from previous relationships.

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Who Should Get a Cohabitation Agreement?

People who are older, and therefore tend to have more assets and more complex financial lives, may be more likely to benefit from the protection provided by a cohabitation agreement than those who are younger and just starting out.

However, any couple can benefit from a cohabitation agreement because your lives automatically become financially intertwined when you move in together.

When you live with someone, you will likely both be responsible for paying the rent or mortgage (and related expenses) and for paying any bills, such as utility bills. And, both of your names may be on the lease or the mortgage.

Plus, you’ll both be counting on this as a place to live. You also may join other aspects of your lives, such as buying furniture together, getting a pet together, or having children together.

A cohabitation agreement can spell out how you will share responsibilities during the time you are living together. It can also help you in the event that you decide to part ways and need to determine who gets what. It can be easier to discuss and agree on these issues when you’re in love than during a potentially difficult separation.

(If you are unmarried and buying a property together, that will likely require a different agreement.)

How Do I Get A Cohabitation Agreement?

Because cohabitation agreements are legal contracts, it can be a good idea for each partner to get an attorney to help negotiate and draft the agreement. Getting legal help ensures that the contract will be enforceable and that each party knows his or her rights.

If you’ve already discussed and agreed on most of the parameters, hiring a lawyer to draft the document shouldn’t be all that costly (and can save you a great deal of money if a dispute arises down the line).

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If you’d prefer not to hire a lawyer, you can find free templates for cohabitation agreements online. You can also write your own contract, but you may want to keep in mind that this may make it less likely the agreement would be legally enforceable. The contract can still be useful, however, if you’re both willing to abide by it.

Regardless of how you choose to create your agreement, here are some things you may want to consider including in your cohabitation agreement:

• Whether one or both names will be on the lease.

• How rent will be divided.

• Whether owned property will have both names on the deed and who will be responsible for paying the mortgage.

• Who will pay bills, utilities, insurance, and other household expenses.

• Whether you will keep finances completely separate or create a joint account.

• How shared purchases, such as furniture, will be made.

• Who will remain in the home in the event of a breakup and how the other partner would be compensated.

• What property is considered separate and what property is considered joint (say anything from furniture to a joint brokerage account) and how will the latter be divided in the event of a breakup.

• Who will assume responsibility for any pets if a breakup occurs.

• Who is responsible for managing or paying off debts incurred by the couple during cohabitation.

• Who is responsible for debts incurred prior to cohabitation.

• Whether a higher-earning partner will be responsible for paying any support to the other partner after a breakup.

• Whether or not the agreement will remain in effect if you get married.

• What happens to shared property if either party passes away.

If you have children and/or are planning on having children together while cohabitating but not married, there may be additional issues you will want to address in your agreement. In this case, getting legal advice can be a wise idea due to the added complexity of your situation.

Once the agreement is written, each partner will need to sign it and keep a signed copy for themselves. It can also be a good idea to have your signatures notarized. While notarization won’t guarantee that a court will find your agreement legal, it will make it easier to prove that both of you signed and agreed to it if you ever have to go to court.

The Takeaway

When you move in with a romantic partner, you will likely be sharing more than a place to live but also expenses and other financial interests.

A cohabitation (or living together) agreement protects the assets you acquired before living together and also specifies how assets and debt acquired during cohabitation will be shared.

A cohabitation agreement can protect your rights and also help you and your partner communicate about big issues, such as how you will divide up the rent and other household expenses and purchases, and whether you will keep your finances separate or open up a joint account.

If you decide to merge at least some of your money, you may want to consider opening a new bank account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

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Sep

2023

Reasons to Balance Your Bank Account Every Month

By Kim Franke-Folstad | Budgeting & Goals, Financial Independence, money | Comments Off

You may wonder if anyone balances their bank account manually anymore given how many aspects of personal finances have become electronic.

Today, paychecks are deposited digitally, automatic bill pay whisks money from one account to another, and smartphones enable check deposits anytime, from anywhere.

Nevertheless, tracking withdrawals and deposits via a checkbook ledger and tallying up amounts can have value.

Monitoring your checking account in this way can help you identify errors or fraud. It can reveal charges and fees you may not have known you were being assessed. It can also put you in better touch with your money and your spending. All those things are definitely positives.

This guide will help you learn the step-by-steps for balancing your checkbook as well as its benefits.

What’s The Purpose Of Balancing Your Checking Account?

Back in the not-so-distant past, most people who had a bank account received a paper statement once a month in the mail.

On the first few pages, the statement listed the past month’s transactions — checks that had cleared, deposits that had posted, ATM and other withdrawals — along with the account balance as of the day the statement was printed.

On the back page, there was a reconciliation worksheet. There, account holders could add or subtract anything that was missing on the statement (deposits or withdrawals that hadn’t yet posted) to be sure the balance they thought they had actually matched the one the bank was reporting.

While some considered the process of balancing or monitoring a bank account tedious and frustrating, others diligently did the math every month.

Times have changed. Though financial institutions are legally required to mail those old-school statements to customers who want them, most have been touting the benefits of going paperless for years. Plus, customers now have 24/7 access to their account information using a website or an app.

Many banks also will provide a monthly online statement with the same data as the old paper statement, usually in the same or a similar format. They’ll even send a notification when the statement is ready.

But since this requires taking the time to log on, review the numbers, check for errors, and maybe do some math, many people procrastinate or simply skip regular account reviews. This can be especially true if they have multiple bank accounts.

But monitoring and balancing a bank account still plays an important role in responsible money management.

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People – and Institutions – Sometimes Make Mistakes

Even if you are a fastidious record keeper, logging every cash withdrawal, bill payment, and deposit into a paper ledger, spreadsheet, or app, we all make mistakes from time to time.

Maybe an ATM receipt went missing or bill payment was forgotten or recorded incorrectly. By reconciling an account regularly, these little mistakes can be quickly fixed. This will allow you to have an accurate picture of your account, and help avoid overdraft charges and/or bounced checks.

Banks also can make errors. Duplicate charges are rare, but they can occur. Automatic payments may occasionally go awry. And it’s possible for deposits to land in the wrong account.

Even though the mistake might be the bank’s fault (because of human or technical error), it’s up to the account holder to bring it to someone’s attention — either by calling or writing to the financial institution.

In most cases, the Electronic Fund Transfer Act (EFTA) gives an account holder 60 days after receiving the bank statement with evidence of an error to challenge a problem with a direct deposit, ATM use, phone transfer, and other transactions.

But the time frame for reporting other bank errors may vary — rules may differ from bank to bank. Consumer advocates advise making contact as soon as possible upon spotting a mistake.

Reviewing an account regularly can help limit a consumer’s liability.

It also can be a good idea to check on vendor charges. Reviewing debit card, pay-by-phone, and even recurring automatic charges on a bank statement every month can help catch small errors before they become bigger problems.

A bank statement can provide the official documentation needed to dispute the charge with the vendor or financial institution.

Scammers Hope People Aren’t Paying Attention

Every time a person makes an ATM withdrawal, pays for gas with a debit card, or places an order online, there’s a chance someone is out there, waiting to steal their identity and their money.

Scammers sometimes start by making small purchases and, if no one seems to notice, bump up the spending to a more serious level.

Consumers who check their accounts regularly may have a better chance of spotting fraud faster, limiting their own liability and helping the bank deal with potential problems.

Reconciling Regularly Can Help Manage Automatic Payments

Automatic bill payments are convenient and can help an account holder avoid late payments (and late fees).

But the downside is that those bills might not get the same attention as those we have to make some effort to pay ourselves every month by check, phone or online. Ready or not, the money comes out of the bank account as scheduled, and if the account is low on the payment date, it can lead to bounced checks and overdraft fees.

Account holders who check their statements regularly may find they’re more aware of and prepared for the amount and timing of their autopay charges. They also might find they’re ready to dump or reduce the cost of some of the services and subscriptions they’ve been paying for every month or year.

💡 Quick Tip: Are you paying pointless bank fees? Open a checking account with no account fees and avoid monthly charges (and likely earn a higher rate, too).

Reviews May Offer Insights into Spending and Saving Behaviors

Reviewing their bank statements may help those who need or want to take more control of their spending to see exactly where their money is going every day, week, or month.

Regularly scheduled reconciliations enable people to see exactly how much they’re spending every week on nonessentials, such as in-app purchases or happy hours. This kind of information can help people budget more effectively and help bring them closer to their savings goals, such as a downpayment on a home.

Identifying Unnecessary Fees Can Save Money

Bank fees can eat away at a bank balance so slowly, an account holder might not even notice. The average monthly fee for a checking account now runs around $12. An out-of-network ATM withdrawal fee currently averages more than $4. Overdraft fees are typically $35 a pop.

Those charges can quickly add up — but if it’s all laid out there in black and white on a statement, it might be harder to ignore how much money is slipping away every month. (It also might provide more motivation to find a way to avoid those fees in the future.)

How to Balance Your Checking Account

Of course, account holders can always check on their available balance by using an ATM, or by logging into their account online or with an app. But that’s just a snapshot — and the picture could change in just a few minutes, depending on what transactions hit the account throughout the day.

By reconciling your records with your monthly online or paper statements on a regular basis, account holders can dig into the details of where their money is going, and be confident they aren’t missing any mistakes or paying fees or bills they aren’t aware of.

• Start by gathering the receipts and records for any spending and deposits for the period chosen. (If you use a check register, grab that. If you write your purchases down in a notebook or use software or a spreadsheet, use those. If you collect ATM receipts, pull that pile together, too.)

• Match those records with the bank statement. If you missed something the bank has listed and you’re sure it’s accurate (an ATM fee, for example, or a birthday check you deposited and forgot about), add it to your records.

• Take the statement balance and subtract payments that are in your records but haven’t yet cleared the bank, and add in any deposits that haven’t yet been posted.

• The amount you come up with should match with the balance you have in your register/notes/spreadsheet. If it doesn’t, you may have to do a closer check to see what you might have missed or if your math is a little off.

• If you’re confident that the bank made a mistake or you notice anything else askew, contact the bank by phone, email, messaging, or in-person right away to let them know about the inconsistency.

The Takeaway

With so many other tech tools available to help track saving and spending, reconciling a bank statement every month may seem unnecessary or even archaic.

But the process can serve as an important backup and safeguard, especially for those who have multiple accounts, or who have turned over certain financial tasks (deposits, withdrawals, bill-paying, and budgeting) to automation and apps. It can also help you avoid unnecessary fees and spot mistakes or fraud.

It might even point the way toward better budgeting and money management, and help you reach your short- and long-term financial goals sooner.

Looking for Something Different?

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Advance/Decline Line: Definition, Formula, Examples

What Is the Advance/Decline Line (A/D)?

Where Is the Advance/Decline Line on a Chart?

Advance/Decline Line vs the Arms Index

Advance/Decline Line Formula

Calculating the Advance/Decline Line (A/D)

What Does the Advance/Decline Line Show?

Bearish Divergence: Declining Line

Bullish Divergence: Rising Line

Example of Using the A/D Line

Is the A/D Line a Good Indicator?

Pros of the A/D Line

Cons of the A/D Line

How Investors Can Use the Advance/Decline Line

The Takeaway

FAQ

What is considered a good Advance/Decline ratio?

What is the 10-day Advance/Decline line?

What does a period of decline in investment mean?

25 Ways to Find Affordable Housing

How to Find a Cheap Place to Live

1. Searching Craigslist

2. Browsing Zillow

3. Asking Your Friends

4. Asking your Friends to Ask Their Friends

5. Checking PadMapper

6. Teaming up with a Pal

7. Hitting the Pavement

8. Keeping an Eye on Apartments.com

9. Keeping an Ear out at Work

10. Using Bungalow

11. Moving to a Cheaper City

12. Searching Rentable

13. Looking in a Less Trendy Neighborhood

14. Hopping on Hotpads

15. Checking out Local Bulletin Boards

16. Poking Around on Reddit

17. Reaching out to Facebook Communities

18. Looking During the Winter

19. Trying Trulia

20. Considering a Job that Comes with Housing

21. Accessing Apartment List

22. Checking Walk Score (Especially if You Don’t Have a Car)

23. Posting Your Own Classified

24. Considering a Sublet

25. Getting out of Town

The Takeaway

What Is a Unit Investment Trust (UIT)?

Unit Investment Trust (UIT) Explained Clearly

UIT Advantages and Disadvantages

Types of Unit Investment Trusts

UIT vs. Mutual Fund

How Are UITs and Mutual Funds Similar?

What Are the Differences Between UITs and Mutual Funds?

How to Invest in UITs

Investment Costs

Unexpected Taxes

Are UITs a Good Investment?

Should You Consider Investing in a Unit Investment Trust?

The Takeaway

FAQ

Are fixed unit investment trusts redeemable?

What is the difference between unit trust and investment trust?

Are UITs actively managed?

Should You Sign a Cohabitation Agreement With Your Partner?

What Is a Cohabitation Agreement?

Who Should Get a Cohabitation Agreement?

Get up to $300 when you bank with SoFi.

How Do I Get A Cohabitation Agreement?

The Takeaway

Reasons to Balance Your Bank Account Every Month

What’s The Purpose Of Balancing Your Checking Account?

People – and Institutions – Sometimes Make Mistakes

Get up to $300 when you bank with SoFi.

Scammers Hope People Aren’t Paying Attention

Reconciling Regularly Can Help Manage Automatic Payments

Reviews May Offer Insights into Spending and Saving Behaviors

Identifying Unnecessary Fees Can Save Money

How to Balance Your Checking Account

The Takeaway

Student Loan
Refinancing

Personal
Loans

Online
Investments