Sep
23
2025
Unrealized Gains & Losses, Explained
An unrealized gain or loss is the change in market value of an asset from its purchase price, before it is sold.
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Sep
23
2025
How to Get a Cashier’s Check Without a Bank Account
If you need a cashier’s check but don’t have a bank account, you will likely have to put some time and effort into getting the form of payment you need. You might open an account ASAP, find a financial institution that will issue a cashier’s check to those who aren’t account holders, or else consider using a money order.
The reason why cashier’s checks can be so restrictive and desirable is that they are a very secure form of payment, issued against a financial institution’s own funds. That is why they are not given out casually.
If you don’t have a bank account but need a cashier’s check, this guide will walk you through your options.
Key Points
• A cashier’s check is a form of payment that is issued by a bank from its own account and signed by a representative of the financial institution.
• It can be challenging to get a cashier’s check without an account, but local banks and credit unions may be willing to accommodate this request.
• If a financial institution does issue a cashier’s check to someone without an account, they will likely have to pay in cash.
• Money orders are an alternative to a cashier’s check and typically have a maximum of $1,000.
• Other options include using a P2P app to transfer funds, such as PayPal or Venmo.
🛈 Currently, SoFi does not offer cashier’s checks.
What Is a Cashier’s Check and How Does It Work?
A cashier’s check is a type of check that is issued by a bank from its own account and signed by a representative of the financial institution. Because the funds are guaranteed by the bank as opposed to the check writer, recipients of a cashier’s check can be assured of its security. They can feel confident that it won’t bounce.
(This is assuming, of course, that it’s not a fake or forged document — not even cashier’s checks are immune to fraud, which is why it’s important to verify a check.)
When a consumer buys a cashier’s check, the bank will typically withdraw funds from that person’s checking or savings account and then deposit them into its own account. From there, the bank will write the cashier’s check from its own account.
You may wonder what the difference is between a cashier’s vs. a certified check. With a certified check, the money is withdrawn from an account holder’s check and then certified by the bank. This certification indicates that there are enough funds in the account to cover the check and verifies that the account’s owner’s identity was confirmed by the bank. However, the money is not placed into the bank’s own account as an interim step.
Procedures involving checks, like ordering checks or having a cashier’s check prepared, often involve a fee. For cashier’s checks, this could be a flat fee of $10 or $15 or sometimes a percentage of the check’s amount. The fee may be waived for clients who have premium accounts.
Can You Get a Cashier’s Check Without a Bank Account?
Bank policies can vary, but it can be more challenging to get a cashier’s check without an account. Credit unions may be more willing to offer this service than banks, but it’s important to check with an individual institution to find out whether they’ll offer a cashier’s check without an account.
Keep in mind that you can only get a cashier’s check through a financial institution like a bank or credit union. You cannot purchase one at, say, the post office or Western Union.
If you do find a financial institution that will issue a cashier’s check to non-customers, the rest of the process will be largely the same as it is for customers — except that you will need to pay in cash because the funds can’t be withdrawn from an account.
The steps will likely involve:
• Providing proper identification
• Giving the financial institution the cash to deposit into its account
• Letting the bank employee know the amount of the check you’ll need
• Supplying the correct spelling of the recipient’s (payee’s) name
• The bank printing all of the information; this means you can’t make any changes or handwritten corrections
Where to Get a Cashier’s Check Without a Bank Account
As far as where to get a cashier’s check without a bank account, most financial institutions won’t accommodate this request. You will likely have to do a bit of research to find one that does. You might try smaller local banks and credit unions in your area to see if they will accommodate this request.
Here is another work-around:
Opening and Closing an Account
If you know you’ll need to have a cashier’s check in the near future, opening a checking account now can position you for this financial transaction. To do so, you will typically need to provide information confirming your identity and choose which type of account you wish to open. From there, you can fill out an application and make an opening deposit, if required.
Then, once the account is up and running, you can request a cashier’s check. Make sure not to get one too far in advance of when it’s needed, because how long a check is good for is typically six months.
When you’re ready to close the account, be sure to transfer funds and move automatic transactions over to a new one, if that’s your plan, or to find other ways to handle these matters.
Can You Get a Cashier’s Check at Any Bank?
Virtually all financial institutions (traditional and online banks, credit unions) will issue cashier’s checks. The challenge can be that they typically only create these financial instruments for account holders.
If you just walk into or contact a bank where you do not have an account, they may not be willing to issue a cashier’s check for you. That’s true even if you have enough cash on you to cover the amount of the check you’re seeking.
Is There a Maximum Amount for a Cashier’s Check?
There is typically no upper limit for cashier’s checks, though policies may vary from one financial institution to the next.
The fact that there isn’t usually a maximum amount for cashier’s checks makes them particularly useful for larger purchases. For example, when undertaking a real estate transaction or buying a car, a cashier’s check may be a preferred form of payment for both parties involved.
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Money Order: An Alternative to a Cashier’s Check
If you’re struggling to get a cashier’s check without a bank account or are simply curious what alternatives there may be, you may consider a money order. A money order is a type of paper check that can’t bounce because it’s been prepaid by the sender. Typically, there’s a limit to the value of these, a maximum of $1,000. One big advantage of money orders is that you don’t need a bank account to get one. This can make it an important option for those who are unbanked.
For instance, you can go to the post office and do the following:
• Purchase money orders using cash, a traveler’s check, or a debit card (though not a credit card)
• Pay the face value of the money order, plus a fee of a couple of dollars (for a domestic money order)
• Fill out the money order to the payee and complete the transaction
Many banks and credit unions also sell money orders for a small fee of a few dollars, which may be waived for certain customers.
Money orders are also available at some retail locations, such as pharmacies, convenience stores, Western Union, Moneygram, and more. While fees may vary from location to location, they are usually no more than a few dollars.
Another Options to a Cashier’s Check
If a money order isn’t the right vehicle for you, there may be another way to move money if you cannot access a cashier’s check. You might be able to use a P2P app to transfer funds, such as PayPal or Venmo. These services can have transaction limits and fees, so do your research first.
The Takeaway
A cashier’s check is a form of payment that must be issued by a financial institution. Typically, funds are taken out of a customer’s savings or checking account and deposited into the bank’s account. Then the check is issued from the bank’s account, which provides a significant amount of security. Some banks or credit unions may allow you to buy a cashier’s check even if you are not a customer, but you may need to call around to determine where this is available. Money orders, meanwhile, can be purchased at the post office, financial institutions, and some retail and convenience stores.
FAQ
Can you get a cashier’s check without a bank account?
Many financial institutions do require a bank account to issue a cashier’s check. You may be able to get one without an account, perhaps through a credit union. It’s likely easier to buy a money order if that form of payment is acceptable to the recipient. This type of check is more widely available, including at the post office, financial institutions, and some retail and convenience stores.
Can I get a cashier’s check somewhere other than a bank?
No. By definition, a cashier’s check comes directly from a bank’s account. You can, however, get a money order from a variety of establishments, including the post office, financial institutions, and some stores.
Can I use a money order instead of a cashier’s check?
That depends upon the recipient. Both forms of payment are considered safer than a personal check, but you’ll need to verify that your payee will accept a money order instead of a cashier’s check if that’s what they requested. Also keep in mind that money orders may only be available in denominations up to $1,000.
Can you get a cashier’s check at the post office?
Only a financial institution can issue a cashier’s check because it comes directly from the bank’s or credit union’s own account. Thus, you cannot get a cashier’s check at the post office. The post office does issue money orders, however, which can be a good alternative if your recipient will accept this form of payment.
About the author
Kelly Boyer Sagert
Kelly Boyer Sagert is a full-time freelance writer who specializes in SEO-optimized blog and website copy: both B2B and B2C for companies ranging from one-person shops to Fortune 500 companies. Read full bio.
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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.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
SOBNK-Q325-037
Read moreSep
22
2025
What Are High-Net-Worth Individuals?
Table of Contents
A high-net-worth individual (HNWI) is generally considered to be someone who has at least $1 million in liquid assets. Liquid assets include cash and investments that can easily be converted into cash.
Someone who has a high net worth may rely on specialized financial services for money management. For example, they may work with a wealth manager or open accounts at a private bank. In terms of financial planning, the needs of high-net-worth individuals may include estate planning, investment guidance, and tax management.
Achieving a high net worth is often done through strategic investing and careful portfolio building. It’s important to keep in mind that high-net-worth individuals may have access to certain investments that the everyday investor would not. Minimizing liabilities is another part of the wealth-building puzzle, as net worth takes debt into account alongside assets.
Key Points
• High-net-worth individuals (HNWIs) have at least $1 million in liquid assets.
• Very-high-net-worth individuals (VHNW) have $5 to $30 million in liquid assets.
• Ultra-high-net-worth individuals (UHNWIs) have $30 million or more in liquid assets.
• HNWIs may enjoy benefits like reduced fees, discounts on financial services, access to exclusive investments.
• Increasing net worth involves paying off debts, reducing expenses, and investing early and consistently.
What Defines a High-Net-Worth Individual?
A high-net-worth individual is someone who has substantial wealth. One commonly accepted definition of high net worth is having $1 million or more in liquid assets after all liabilities (debts) are subtracted. Liquid assets include cash and investments like stocks but exclude any assets that can be difficult to sell, such as the individual’s primary home and assets like antiques and fine art.
That said, definitions of high net worth can vary. Financial advisors who are registered with the Securities and Exchange Commission (SEC ) must report how many HNWI clients they have on Form ADV each year. For the purposes of this form, a HNWI is defined as having $750,000 in investable assets or a $1.5 million net worth.
The SEC also refers to high net worth individuals when discussing accredited investors. An accredited investor is defined as having:
• Earned income of $200,000 or more (or $300,000 for couples) in each of the two prior years, with a reasonable expectation of the same income in future years
• Net worth of over $1 million either alone or with a spouse, excluding the value of a primary residence
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Benefits Afforded to HNWIs
High-net-worth individuals may get a number of special benefits. For instance, they might qualify for reduced fees and discounts on financial services like investments and banking. They may also be granted access to special perks and events.
HNWI can also invest in things other investors or the general public can’t, such as hedge funds, venture capital funds, and private equity funds.
HNWI Examples & Statistics
The super rich, or HNWIs, are tracked by Forbes on the Real-Time Billionaires List, which is updated daily. As of September 4, 2025, these were the HNWI at the top of the list:
• Elon Musk with a net worth of $428.4 billion
• Larry Ellison with a net worth of $272.8 billion
• Mark Zuckerberg with a net worth of $252.4 billion
• Jeff Bezos with a net worth of $238.2 billion
• Larry Page with a net worth of $192.5 billion
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How Is Net Worth Calculated?
Wondering how to find net worth? It’s a relatively simple calculation. There are three steps for figuring out net worth:
1. Add up assets. These can include:
◦ Bank account balances, including checking, savings, and certificates of deposit
◦ Retirement accounts
◦ Property, such as real estate or vehicles
◦ Collectibles or antiques
◦ Businesses someone owns
2. Add up liabilities. Liabilities are debts owed. For example, a home’s value can be considered an asset for net worth calculations. But if there’s a mortgage owing on it, that amount has to be entered into the liabilities column.
3. Subtract liabilities from assets. The remaining amount is an individual’s net worth.
Net worth can be a positive or negative number, depending on how much someone has in assets versus what they owe in liabilities.
Net Worth vs Liquid Net Worth
In simple terms, net worth is the difference between assets and liabilities. Liquid net worth is a subset of net worth that only considers cash and other holdings that can quickly become cash, minus your liabilities (what you owe).
Liquids assets include cash in a savings account, stocks, money market funds, and exchange-traded funds (EFTs). Examples of illiquid assets are real estate, land, hedge funds, antiques, jewelry, and collections (such as cars, coins, or rare stamps).
What Is an Ultra-High-Net-Worth Individual?
A very-high-net-worth individual (VHNWI) is someone holding liquid assets between $5 million and $30 million. To fit the definition of an ultra-high-net-worth individual (UHNWI), you need to have liquid assets of $30 million or more. People who are considered to be ultra-high-net-worth individuals are among the wealthiest in the world.
For example, UHNWIs fall into the top 1% of U.S. households, which requires a minimum of $13.7 million in net worth. However, UHNWIs may or may not be part of the top 0.1% in the U.S., since this requires a net worth of approximately $62 million.
According to Knight Frank’s 2024 Wealth Report, the U.S. is home to the most UHNWIs in the world, which is 208,560.
💡 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.
How to Get a Higher Net Worth
Reaching high-net-worth status can be a lofty goal but it’s one many HENRYs — high earner, not rich yet — work toward. The typical HENRY makes most or all of their income from working. While they may earn an above-average income, they may not have sufficient disposable income to start building wealth to increase their net worth.
There are, however, some ways to change that. For example, someone who earns a higher income but doesn’t have the higher net worth to reflect it may consider things like:
• Paying off student loans or other debts
• Relocating to a less expensive area to reduce their cost of living
• Rethinking their tax strategy so they’re able to keep more of their income
• Finding ways to increase income
Coming up with a solid investment strategy is also important for boosting net worth. That includes diversifying across assets like stocks, bonds, and real estate. It’s also important to start early and invest consistently, as this allows you to benefit from compound growth (when the returns you earn start earning returns of their own).
Creating multiple streams of income with investments and/or starting a side hustle can also help with making progress toward a higher net worth. At the same time, it’s important to take advantage of wealth-building assets you may already have on hand.
For example, if you have access to a 401(k) or similar plan at work, then making contributions can be an easy way to increase net worth. If your employer offers a company matching contribution you could use that free money to help build wealth.
The Takeaway
High-net-worth individuals are typically described as people who have $1 million or more in liquid assets. Those with $5 to $30 million in liquid assets may be labeled as “very high net worth”, and those with more than $30 million in liquid assets are generally considered ultra-high-net worth individuals.
While HNWIs enjoy access to exclusive financial opportunities, the path to building wealth is rooted in strategies anyone can use. These include consistent investing, minimizing liabilities, and focusing on long-term growth.
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FAQ
What are different types of high-net-worth individuals?
There are several types of high-net-worth individuals. Those who are high net worth have more than $1 million in liquid assets. Individuals with at least $5 million in liquid assets are considered very high net worth. If a person has more than $30 million in liquid assets they are considered ultra high net worth.
Where are most of the HNWIs located?
The U.S. has the highest number of high-net-worth individuals (HNWIs). According to Knight Frank’s 2025 Wealth Report, the number of individuals living in the U.S. with at least $10 million in net worth is 905,000. Next comes China (with 472,000), followed by Japan (122,000), India (86,000), and Germany (70,000).
Do high-net-worth individuals include 401(k)?
A 401(k) is part of your net worth, which is defined as your total assets (what you own) minus your total liabilities (what you owe). However, a high-net-worth individual (HNWI) is generally defined as someone who has at least $1 million in liquid assets. Liquid assets include cash and investments that can easily be converted into cash. A 401(k) usually isn’t considered a liquid asset unless you’ve reached the age of 59 ½, since making a withdrawal prior to this age can trigger a penalty.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Dollar Cost Averaging (DCA): Dollar cost averaging is an investment strategy that involves regularly investing a fixed amount of money, regardless of market conditions. This approach can help reduce the impact of market volatility and lower the average cost per share over time. However, it does not guarantee a profit or protect against losses in declining markets. Investors should consider their financial goals, risk tolerance, and market conditions when deciding whether to use dollar cost averaging. Past performance is not indicative of future results. You should consult with a financial advisor to determine if this strategy is appropriate for your individual circumstances.
SOIN-Q325-111
Read moreSep
18
2025
Guide to Morningstar Ratings
Table of Contents
Morningstar is a well-respected global financial services and research company that provides data, analysis, ratings, and a range of tools to help institutional and individual investors sort through and evaluate some 600,000 investment vehicles.
Since 1984, Morningstar has conducted independent research on stocks, bonds, mutual funds, exchange-traded funds (ETFs), and more. While the company collects and analyzes data on many aspects of many different assets, it’s primarily known for its five-star rating system.
Morningstar ratings aren’t predictive. But because their research is conducted independently, they are able to provide an evaluation of past performance, and potential risks and return factors that many investors find useful.
Key Points
• Morningstar is an independent financial services research firm that collects data on a wide range of securities.
• Morningstar is principally known for its five-star ratings system, which reflects the past performance of stocks, bonds, mutual funds, and ETFs.
• The five-star rating system is based on historic data, so while it’s not predictive, these ratings help identify potential risks, as well as the potential for returns.
• In addition to its ratings, Morningstar offers investors an array of tools, such as stock screeners, portfolio trackers, and more.
• While well-respected, Morningstar cannot accurately predict the performance of any asset, and investors typically use these and other tools in combination.
What Are Morningstar Ratings?
The Morningstar ratings system is a tool investors can use to compare financial securities such as mutual funds and ETFs, stocks, bonds, and other securities. Particularly valuable to investors: Morningstar ratings evaluate risk-adjusted as well as price-adjusted returns of investments.
Morningstar is an independent financial services company, and thus relies on its own data and research to evaluate the performance, risks, pricing, and other aspects of certain investment products.
Morningstar reviews of mutual funds and ETFs also reflect how a fund performs relative to its benchmark and to its peers. The main Morningstar ratings investors may turn to learn more about a particular investment are the Star Ratings and Analyst Ratings. (Morningstar also has a separate ratings system for individual stocks.)
These ratings can be helpful to investors for a variety of reasons — whether they’re trying to diversify their portfolios, or do some research into socially responsible investing, and trying to find investments that fit their strategy.
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How Morningstar Ratings Work
As Morningstar itself describes, the ratings system uses a methodology based on specific categories and risk-adjusted return metrics. The company will only rate a fund that’s been around for more than three years. Morningstar also updates its ratings on a monthly basis.
You can use these ratings to select the funds available in your 401(k), buy stocks online or through a traditional brokerage, or to decide which funds to add to an IRA or a taxable brokerage account.
The “Star Rating” Explained
The Morningstar Star Rating system, usually shortened to Morningstar ratings, is a quantitative ranking of mutual funds and ETFs. Introduced in 1985, the star rating looks at a fund’s past performance, then assigns a rating from one to five stars based on that performance.
As mentioned, Morningstar reviews ETFs and mutual funds with a record of more than three years, so newer funds do not receive a star rating until they’re reached this milestone. The rating methodology utilizes an enhanced Morningstar risk-adjusted return measure. Specifically, the star ratings system looks at each fund’s three-, five-, and 10-year risk-adjusted returns.
Star ratings can serve as a report card of sorts for comparing different funds, based on how they’ve performed historically. The Morningstar ratings are not forward-looking, as past performance is not a foolproof indicator of future behavior. But investors can use the ratings system as a starting off point for conducting fund research when deciding where to invest.
Morningstar ratings are free, and investors who are selecting investments for a traditional IRA, Roth IRA, or other retirement or investment account, may find it helpful to sort through the many available options.
If you’re looking for a tool to help you compare mutual funds or ETFs at a glance based on past performance, the star rating system can help.
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The “Analyst Rating” Explained
The Morningstar Analyst Rating takes a different approach to ranking funds and ETFs. Instead of looking backward, the qualitative analyst rating looks forward to assess a fund’s ability to outperform similar funds or a market benchmark.
Rather than using stars, funds receive a rating of Gold, Silver, Bronze, Neutral or Negative, based on the analyst’s outlook for performance.
The firm does not update analyst ratings as frequently as star ratings. Morningstar reviews for analyst ratings are reevaluated at least every 14 months. The firm typically assigns analyst ratings to funds with the most interest from investors or the most assets.
When ranking funds, analysts look at three specific metrics:
• People
• Process
• Parent
Performance is also taken into account within the People and Process pillars. In order to earn a Gold, Silver or Bronze rating, an analyst must determine that an active fund can beat its underlying benchmark when adjusted for risk.
Generally speaking, these Morningstar reviews go into more detail, in terms of the analysis, ranking, and comparison of funds.
How Morningstar Measures Volatility
Morningstar uses a few key volatility measurements as it aims to minimize risk and maximize returns through strategic diversification. Chief among those measurements are standard deviation, mean, and the Sharpe ratio.
It’s a somewhat complicated process, but using these three measurements in tandem helps Morningstar get a handle on volatility and make appropriate ratings decisions.
Example of a Morningstar Rating
Morningstar star ratings are free to access for investors on the company’s website, and it’s relatively easy to find plenty of examples of Morningstar ratings on the platform. For instance, to find a star rating for a particular fund or ETF you’d simply search for it using its name or ticker symbol.
You can also view Morningstar ratings and picks for funds by category, such as small-cap funds or U.S. or international index funds.
Here’s an example of a Morningstar rating for the Vanguard Total International Stock Index (VTIAX), as of Sept. 6, 2025. This fund, which is in the foreign large-blend category and is an index fund, has a three-star rating from Morningstar — and a Gold Morningstar analyst rating.
The fund has a lower expense ratio for its category of 0.09%, a minimum investment of $3,000 and $525.7 billion in assets.
While the three-star rating may sound middle-of-the road, it’s likely due to the fund’s slightly higher risk profile. But the Gold analyst rating indicates that the fund has a lower cost, and an extensive market-cap-weighted portfolio that tracks the FTSE Global All Cap ex US Index, which has over 8,000 constituents, providing investors with diversification in overseas equities.
This is just one example. Morningstar researches and provides ratings for thousands of assets in a range of categories and products.
Are Morningstar Ratings Accurate?
Morningstar fund ratings are designed to be a guide as you invest; they cannot predict how well a fund is likely to perform. For example, there’s always going to be risk involved when investing, so don’t expect any rating to be a sure-thing.
Assessing the Reliability of Morningstar Ratings
So, how well do Morningstar ratings perform over time and are they an accurate guide for investing? According to Morningstar’s own analysis of its ratings system, the star ratings can be a useful jumping-off point for investors. That analysis resulted in three key findings:
• Funds with higher star ratings tend to have lower expense ratios and be cheaper for investors to own.
• Higher-rated funds tend to be less volatile and experience less dramatic downward swings when the market is in flux.
• Funds that received higher star ratings tended to produce higher returns for investors compared to funds with lower ratings.
The analysis didn’t look specifically at how star ratings and fund performance aligned through different bull and bear markets. But the ultimate conclusion Morningstar drew is that the Star Ratings tend to steer investors toward cheaper funds that are easier to own and stand a better chance of outperforming the market.
Use Expense Ratios
According to Morningstar, fees are one of the best predictors of future performance, at least for Star Ratings. For funds and ETFs, that means it’s important to consider the expense ratio, which represents the cost of owning a fund annually, calculated as a percentage of fund assets.
Actively managed funds typically carry higher expense ratios, as they require a fund manager to play an important role in selecting fund assets. Passively managed funds and ETFs, on the other hand, often have lower expense ratios.
So which one is better? The answer is that it all comes down to performance and returns over time. A fund with a higher expense ratio is not guaranteed to produce a level of returns that justify higher fees. Likewise, a fund that has a lower expense ratio doesn’t necessarily mean that it’s a poor investment just because it’s cheaper to own. Morningstar’s research found that the average one-star fund cost significantly more than the average five-star fund.
As you do your own research in comparing funds and ETFs, consider both performance and cost. This can help you find the right balance when weighing returns against fees.
How Should Investors Use Morningstar Ratings?
How much do Morningstar ratings matter in the grand scheme of things? The answer is, it depends on what you need from investment research tools.
Morningstar reviews of mutual funds and ETFs can be helpful for comparing investments, especially if you’re just getting started with the markets. Morningstar is a respected and trusted institution and both the Star and Analyst Ratings are calculated using a systematic approach. The reviews aren’t just thrown together or based on a best guess.
They’re designed to be a guide and not a substitute for professional financial advice. So, for instance, you may use them to compare two index funds that track the same or a similar benchmark. Or you may use them to compare two ETFs that are representative of the same market sector.
Risks of Morningstar Ratings
Morningstar ratings are not an absolute predictor of how a mutual fund or ETF will perform in the next five minutes, five days, or five years. After all, there’s no way to perfectly forecast how any investment will perform as the market changes day to day or even minute-to-minute.
One risk to avoid with Morningstar ratings is relying on them solely as your only research tool and not doing your own independent research. Again, that means checking expense ratios as well as looking at the underlying assets of a particular fund and its investment strategy (i.e., active vs. passive) to determine how well it aligns with your goals and risk tolerance.
Looking only at Morningstar reviews without doing your own due diligence could cause you to invest in funds that aren’t the best fit for your portfolio. Or you may overestimate how well a fund will perform, only to be disappointed later.
Morningstar Ratings for Funds
Morningstar’s original rating system of one to five stars enabled investors to evaluate a fund’s past performance within four broad asset classes: domestic equity funds, international equity funds, taxable bond funds, and municipal bond funds.
One useful aspect of the ratings is that they include risk-adjusted and cost-adjusted returns for investors. Given that most investors own several, sometimes many different mutual funds and ETFs in their portfolios and retirement accounts, Morningstar also offers a Category rating — which allows investors to evaluate a fund within a smaller more relevant grouping of related assets.
Also, as it bears repeating, a good, average, or poor Morningstar rating does not mean that an investment is risk-free.
Other Investment Risk Rating Providers
Morningstar is just one of many companies that offers investment ratings. Bloomberg, Nasdaq Market Data Feeds, S&P Global Market Intelligence, MarketWatch, Thomson Reuters, and others all offer investment ratings, rankings, stock and fund screeners, and other tools.
In addition, many financial institutions collect and analyze their own data and offer proprietary metrics and tools that investors can also use to assess those products.
Investors should take into account who is collecting the data, and where that data comes from, when deciding what type of investment rating to use for their own portfolios.
The Takeaway
Having reliable research tools can help you make educated decisions about where and how to invest. Morningstar ratings are one tool you can use. But keep in mind that there are many ratings services on the market, and that Morningstar’s ratings are far from the only research tool out there.
It’s also important for investors to keep in mind that all investments involve risk, whether they’re highly rated or not.
Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.
FAQ
How reliable are Morningstar ratings?
Morningstar ratings are generally considered to be high-quality in the financial industry, but that doesn’t mean that these ratings are always spot-on. All investing involves risk, and even a high rating doesn’t guarantee that an investment will pan out.
Is a Morningstar rating of “5” good?
Morningstar uses a scale of one to five stars to rate investments, with five stars being the highest, or best-quality investment. So, yes, a five-star rating is generally considered good, although not risk-free.
Why do investors use Morningstar?
Individual and institutional investors alike use Morningstar ratings to help sort through and evaluate the hundreds of thousands of available investment products. Morningstar has developed a reputation for being reliable, because its data is collected and analyzed independently of any financial firm.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
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.
SOIN-Q325-098
Read moreSep
16
2025
How to Trade ETFs: A Guide for Retail Investors
Table of Contents
Trading ETFs is, in many ways, similar to trading stocks or other securities, and can be done on most stock-trading platforms or brokerages. And while conventional wisdom suggests investors are limited in what they can do with an exchange-traded fund (ETF), an investor can likely find a fund that fits their portfolio.
But investors have different goals and strategies, and that may include trading or otherwise buying and selling ETFs frequently. Trading ETFs is fairly simple, though, and investors would do well to know how to trade ETFs.
Key Points
• ETF trading is similar to stock trading, and is available on various platforms.
• Market orders execute at the best available current prices, while limit orders execute at specific prices or better.
• ETFs offer liquidity and a wide range of investment options.
• Trading strategies may be based on technical and fundamental analysis.
• Risks are comparable to stocks, but the liquidity of ETFs may help investors manage downside risks.
What Is an ETF (Exchange-Traded Fund)?
An exchange-traded fund, or ETF, is a popular investment vehicle that enables investors to buy a group of stocks in one bundle, thus promoting investment diversity and efficiency. They’re widely available, usually through major investment fund companies.
ETFs aren’t mutual funds, although they originate from the same fund investment family. One of the primary differences between the two is that mutual funds are usually more expensive than exchange traded funds, since mutual funds are typically actively managed while ETFs are usually passively managed.
Another benefit of ETFs is that whereas mutual funds can only be traded after the end of the market day, ETFs can be traded during open market sessions at any point in the day. ETFs have become wildly popular, too, over the years.
💡 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.
Different Types of ETFs
ETFs come in a variety of different types, including the following:
• Stock ETFs: This type of ETF is composed of various equity (stock) investments.
• Bond ETFs: Bond ETFs hold different types of bond vehicles, like U.S. Treasury bonds, utility bonds, and municipal bonds.
• Commodities: Commodity ETFs are popular with investors who want exposure to gold, silver, copper, oil, and other common global commodities.
• International ETFs: Global-based ETFs often include country-specific and location-specific funds, like an Asia ETF or a Europe ETF, which are made up of companies based in the country featured in the ETF.
• Emerging market ETFs: This type of ETF is composed of stocks from up-and-coming global economies like Indonesia and Argentina.
• Sector ETF: A sector ETF is focused on an economic sector, like manufacturing, health care, climate change/green companies, and semiconductors, among others.
Recommended: Tips on How to Choose The Right ETF
4 Reasons to Consider Trading ETFs
Trading ETFs offers the same advantages (and risks) associated with trading common stocks. These features and benefits are at the top of the list.
1. ETFs Can Provide Liquidity
In a multi-trillion dollar market, there is likely no shortage of investors looking to buy and sell ETFs. By and large, the bigger the market, the more liquidity it provides, and the easier it is to move in and out of positions.
2. There are Different Investment Options
With ETFs widely available in categories like stocks, bonds, commodities, and more recently, green industries and others, ETF traders have plenty of investment options.
3. ETFs Offer Portfolio Diversity
Investment specialists often extol the virtue of a diverse portfolio, i.e., one made up of both conservative and more aggressive investments that can balance one another and help reduce risk. With so many classes of ETFs available, it’s relatively easy to build an ETF trading portfolio that has different asset classes included.
4. ETFs Are Relatively Inexpensive to Trade
Exchange-traded funds are typically inexpensive to buy, with some brokerage platforms may offer commission-free ETFs.
What Are the Risks of Trading ETFs?
The main risk associated with trading ETFs is the same as with trading stocks, as you could lose money. While shedding cash is always a threat when trading any security, the liquidity associated with exchange-traded funds makes it relatively easy to sell out of a position if needed. A candid conversation with a financial advisor may help investors deal with ETF investment trading risks.
How to Trade ETFs
Just as you can trade stocks, you can trade ETFs, too, by taking these steps.
Step 1. Choose a Trading Platform
Traditionally, investors trade stocks through a brokerage house or more recently via an online broker. As with most things in life, it’s generally a good idea to look around, kick some proverbial tires, and choose a broker with the best ETF trading services for you.
Investors can choose from different categories of ETF trading accounts, ranging from standard trading accounts with basic trading services to retirement accounts, specialty accounts, or managed portfolio accounts that offer portfolios managed by professional money managers.
Step 2. Select an ETF Trading Strategy
The path to successful ETF trading flows through good, sound portfolio construction and management.
That starts with leveraging two forms of investment strategy — technical or fundamental analysis.
• Technical analysis: This investment strategy leverages statistical trading data that can help predict market flows and make prudent ETF trading decisions. Technical analysis uses data in the form of asset prices, trading volume, and past performance to measure the potential effectiveness of a particular ETF.
• Fundamental analysis: This type of portfolio analysis takes a broader look at an ETF, based upon economic, market, and if necessary, sector conditions.
Fundamental analysis and technical analysis can be merged to build a trading consensus, typically with the help of an experienced money manager.
Any trading strategy used to build ETF assets will also depend on the investor’s unique investment needs and goals, and will likely focus on specific ETF portfolio diversification and management. For example, a retiree may trade more bond ETFs to help preserve capital, while a young millennial may engage in more stock-based ETF portfolio activity to help accumulate assets for the long haul.
Step 3. Make the Trade
Executing ETF trades is fairly straightforward for retail investors. It may be best to consider starting out with small positional trading, so that any rookie mistakes would be smaller ones, with fewer risks for one’s portfolio.
Here are two trading mechanisms that can get you up and running as an ETF trader:
• Market order. With market order trading, you buy or sell an ETF right now at the current share price, based on the bid and the ask — the price attached to a purchase or a sale of a security. A bid signifies the highest price another investor will pay for your ETF and the ask is the lowest price an ETF owner will sell fund shares. The difference between the two is known as the trading “spread.”
A word of caution on market trades. ETFs tend to have wider trading spreads than stocks, which could complicate you’re getting the ETF shares at the price you want. Share trading spreads of 10% are not uncommon when trading ETFs.
• Limit trade orders. An ETF limit order enables you to dictate terms on an ETF purchase or sale. With a limit order, you can set the top price you’ll pay for an ETF and the lowest price you’ll allow when selling an ETF.
For investors who have qualms about buying or selling an ETF at a fixed price, limit orders can be a viable option, as they allow the investor to set the terms for a trade and walk away from an ETF trade if those terms aren’t met.
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.
The Takeaway
Historically, exchange traded funds have been used primarily as passive, “buy and sell investments.” But as asset trading grows more exotic in the digital age, trading ETFs has become increasingly popular. It’s fairly simple to trade ETFs, too, as most investors simply need access to an online trading platform or brokerage.
As with any investment, though, there are risks to consider. While ETFs can be a great starting point for many investors, they’re not entirely safe investments, and investors should do their research before buying shares of any specific ETF, as they would with any other type of security.
Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.
Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹
FAQ
What are some different types of ETFs?
Different types of ETFs include stock ETFs, bond ETFs, international ETFs, emerging market ETFs, and sector ETFs, among others.
What are some advantages of investing in ETFs?
While there may be drawbacks to consider, some of the advantages of investing in ETFs are that they’re relatively liquid investments, there are numerous different types and options available, they can help diversify a portfolio, and are relatively inexpensive.
Is an ETF the same as a mutual fund?
ETFs aren’t mutual funds, although they may be similar. The primary differences between the two is that mutual funds are usually more expensive than exchange traded funds. Mutual funds tend to be actively managed, too.
Photo credit: iStock/PeopleImages
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
SOIN-Q325-123
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