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The average cost of an oil change varies depending on where you live. The type of oil used is another factor, with varieties including conventional, synthetic, and semi-synthetic. For basic service with conventional oil and no extra quarts, you can count on paying between $35 and $75, according to Kelley Blue Book.

We’ll discuss the ins and outs of oil changes, including how often you should get it done, the benefits to your vehicle and the environment, and how to save money on your next oil change.

How Much Does an Oil Change Cost on Average?

The cost of an oil change depends on several things:

•   Vehicle’s year, make, and model

•   DIY vs. service station

•   Geographic location

•   Service provider

•   Type of oil: conventional, synthetic, or synthetic blend

•   Add-on services like filter changes and tire rotation

You’ll pay about $35 for basic service with no extra quarts. Top service with extra quarts will run about $75. This is likely to be with conventional oil.

With semi-synthetic oil, the average cost will be higher: $40-$100. And with fully synthetic oil, the price inches up to $65-$125. Some luxury vehicles require special filters, which can cost $260 or more.

The average cost of an oil change at a dealership is generally around $100; this typically includes a filter change. Another popular add-on is tire rotation, which can tack on $20-$50. It’s possible that a dealership or auto repair shop will offer a small discount for more than one service.

In case you were wondering, oil changes are not covered by car insurance because they’re considered a regular part of car maintenance. Learn more in our Insurance Tips for First-time Drivers.
💡 Quick Tip: Saving money on your fixed costs isn’t always easy. One exception is auto insurance. Shopping around for a better deal really can pay off.

Average Cost of Oil Change by Provider

The table below lists the price of the cheapest oil change option at a number of national service providers. Differences in price are often due to the quality of oil used, and the speed and scope of the service.

Service Provider Lowest-Price Oil Change Service
Firestone $24.99
Goodyear $18.95
Jiffy Lube $29.99
Midas $33.99
NTB $24.99
Pennzoil $25.98
Pep Boys $24.99
Sears $19.99
Valvoline $39.99
Walmart $19.88
Data courtesy of CarServiceCosts.com

Recommended: How to Lower Your Car Insurance

The Difference Between Synthetic and Conventional Oil

Conventional oil is crude oil that’s been refined, while synthetic is made from chemical compounds. Synthetic oil has fewer impurities and is designed to protect car engines.

Conventional oil needs changing more often and can have problems flowing in extreme temperatures. Synthetic oil can be used for longer periods and flows in a wider range of temperatures. Although there are clear advantages to synthetic oil, there’s one disadvantage: It costs more.

Check your owner’s manual to see what type and grade are recommended for your vehicle’s engine. How much your car is worth may factor into your choice of which oil to use.

How Often Should You Get an Oil Change?

Your owner’s manual should also list how often to change the oil in your specific vehicle. In general, conventional motor oil needs to be changed after about 5,000 miles of driving. Synthetic oil can go as long as 10,000 miles. If you use semi-synthetic motor oil (a blend of the two), you may get 8,000 miles of usage before it needs to be changed.

Did you know you should also be evaluating your insurance on a regular basis? Annual personal insurance planning sessions can help your coverage keep up with important life changes.

Benefits of Getting Your Oil Changed

The benefits of regular oil changes are significant. They include:

•   Cleaner engine. When you change the oil, you’re also getting rid of the dirt, debris, and contaminants in the old oil.

•   More efficient engine. When the engine is clean and the oil is new, the engine has better lubrication and works more efficiently. This helps boost performance and maximizes the life of the engine.

•   Better gas mileage. A more efficient engine will help your car get better gas mileage and save you money on fuel.

•   Environmental benefits. When oil stays in your vehicle for too long, it starts to degrade. At this point, it releases potentially toxic hydrocarbons.

•   Prevents overheating. Engine components generate heat, especially when you’re driving at faster speeds. When the engine is freshly and appropriately lubricated with motor oil, this lowers friction and reduces the risk of overheating.

How to Lower the Cost of Oil Changes

As noted above, timely oil changes can reduce fuel costs. To save money on oil changes, you can shop around for the best prices in auto shops or do it yourself.
Before your first DIY oil change, you may need to invest in a few supplies. These include a wrench to remove the drain plug (your owner’s manual should list what size and type), an oil filter wrench, an oil pan, latex gloves, and perhaps a jack.

You can save $25 to $75 per oil change on average, depending on the oil and filter you use. So, once you’ve saved enough to “pay back” what you invested in the right tools, you can enjoy savings each time you change your own oil. Check out more tips for saving on car maintenance costs.
💡 Quick Tip: If your car is paid off and worth only a few thousand dollars, consider updating your car insurance: You might choose to opt out of collision coverage and double down on liability.

The Takeaway

The average cost of a basic oil change with conventional oil is $35, but you can find low-cost oil changes for as little as $19. Higher prices may indicate a better quality of oil, add-ons like filter replacement, or faster service. Your vehicle’s owner manual will recommend a type and grade of oil. Conventional oil is typically cheapest, followed by semi-synthetic, and then fully synthetic. Synthetic oils allow you to go longer between oil changes — 10,000 miles compared to 5,000 with conventional. To save the most money on your oil change, don’t be afraid to DIY.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

FAQ

Is $100 a lot for an oil change?

It depends on where you live, the type of oil used, your vehicle, and add-ons such as filter changes and tire rotation. The average cost of a basic oil change is $35, with prices as low as $19. Ask your service provider for a breakdown of what goes into that $100 oil change.

Should I get my tires rotated when I get an oil change?

Consumer Reports recommends rotating your tires every 5,000-8,000 miles. Tires protect you on the road, so this maintenance task shouldn’t be overlooked. Depending on the kind of oil you use and your owner manual’s recommendation, you may want to have your oil changed every 5,000-10,000 miles. If you can combine your oil change schedule with your tire rotation schedule, you might save a bit of money.

How much do oil changes cost in 2024?

The overall average with conventional oil and no other services provided is somewhere about $35. No-frills service with conventional oil starts at $19. You’ll pay for more synthetic oil and add-ons like filter replacement.

Photo credit: iStock/Phynart Studio

Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, Inc. (“SoFi”) is compensated by Experian for each customer who purchases a policy through Experian from the site.

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

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

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Source: sofi.com

Apache is functioning normally

A traditional 401(k) and a Roth 401(k) are tax-advantaged retirement plans that can help you save for retirement. While both types of accounts follow similar rules — they have the same contribution limits, for example — the impact of a Roth 401(k) vs. traditional 401(k) on your tax situation, now and in the future, may be quite different.

In brief: The contributions you make to a traditional 401(k) are deducted from your gross income, and thus may help lower your tax bill. But you’ll owe taxes on the money you withdraw later for retirement.

Conversely, you contribute after-tax funds to a Roth 401(k) and can typically withdraw the money tax free in retirement — but you don’t get a tax break now.

To help choose between a Roth 401(k) vs. a traditional 401(k) — or whether it might make sense to invest in both, if your employer offers that option — it helps to know what these accounts are all about.

5 Key Differences Between Roth 401(k) vs Traditional 401(k)

Before deciding on a Roth 401(k) or traditional 401(k), it’s important to understand the differences between each account, and to consider the tax benefits of each in light of your own financial plan. The timing of the tax advantages of each type of account is also important to weigh.

1. How Each Account is Funded

•   A traditional 401(k) allows individuals to make pre-tax contributions. These contributions are typically made through elective salary deferrals that come directly from an employee’s paycheck and are deducted from their gross income.

•   Employees contribute to a Roth 401(k) also generally via elective salary deferrals, but they are using after-tax dollars. So the money the employee contributes to a Roth 401(k) cannot be deducted from their current income.

💡 Quick Tip: The advantage of opening a Roth IRA and a tax-deferred account like a 401(k) or traditional IRA is that by the time you retire, you’ll have tax-free income from your Roth, and taxable income from the tax-deferred account. This can help with tax planning.

2. Tax Treatment of Contributions

•   The contributions to a traditional 401(k) are tax-deductible, which means they can reduce your taxable income now, and they grow tax-deferred (but you’ll owe taxes later).

•   By contrast, since you’ve already paid taxes on the money you contribute to a Roth 401(k), the money you contribute isn’t deductible from your gross income, and withdrawals are generally tax free (some exceptions below).

3. Withdrawal Rules

•   You can begin taking qualified withdrawals from a traditional 401(k) starting at age 59 ½, and the money you withdraw is taxed at ordinary income rates.

•   To withdraw contributions + earnings tax free from a Roth 401(k) you must be 59 ½ and have held the account for at least five years (often called the 5-year rule). If you open a Roth 401(k) when you’re 57, you cannot take tax-free withdrawals at 59 ½, as you would with a traditional 401(k). You’d have to wait until five years had passed, and start tax-free withdrawals at age 62.

4. Early Withdrawal Rules

•   Early withdrawals from a 401(k) before age 59 ½ are subject to tax and a 10% penalty in most cases, but there are some exceptions where early withdrawals are not penalized, including certain medical expenses; a down payment on a first home; qualified education expenses.

You may also be able to take a hardship withdrawal penalty-free, but you need to meet the criteria, and you would still owe taxes on the money you withdrew.

•   Early withdrawals from a Roth 401(k) are more complicated. You can withdraw your contributions at any time, but you’ll owe tax proportional to your earnings, which are taxable when you withdraw before age 59 ½.

For example: If you have $100,000 in a Roth 401(k), including $90,000 in contributions and $10,000 in taxable gains, the gains represent a 10% of the account. Therefore, if you took a $20,000 early withdrawal, you’d owe taxes on 10% to account for the gains, or $2,000.

5. Required Minimum Distribution (RMD) Rules

With a traditional 401(k), individuals must take required minimum distributions starting at age 73, or face potential penalties. While Roth 401(k)s used to have RMDs, as of January 2024, they no longer do. That means you are not required to withdraw RMDs from a Roth 401(k) account.

For a quick side-by-side comparison, here are the key differences of a Roth 401(k) vs. traditional 401(k):

Traditional 401(k) Roth 401(k)
Funded with pre-tax dollars. Funded with after-tax dollars.
Contributions are deducted from gross income and may lower your tax bill. Contributions are not deductible.
All withdrawals taxed as income. Withdrawals of contributions + earnings are tax free after 59 ½, if you’ve had the account for at least 5 years. (However, matching contributions from an employer made with pre-tax dollars are subject to tax.)
Early withdrawals before age 59 ½ are taxed as income and are typically subject to a 10% penalty, with some exceptions. Early withdrawals of contributions are not taxed, but earnings may be taxed and subject to a 10% penalty.
Account subject to RMD rules starting at age 73. No longer subject to RMD rules as of January 2024.

Bear in mind that a traditional 401(k) and Roth 401(k) also share many features in common:

•   The annual contribution limits are the same for a 401(k) and a Roth 401(k). For 2024, the total amount you can contribute to these employer-sponsored accounts is $23,000; if you’re 50 and older you can save an additional $7,500 for a total of $30,500. This is an increase over the 2023 limit, which was capped at $22,500 ($30,000 if you’re 50 and older).

•   For both accounts, employers may contribute matching funds up to a certain percentage of an employee’s salary.

•   In 2024, total contributions from employer and employee cannot exceed $69,000 ($76,500 for those 50 and up). In 2023, total contributions from employer and employee cannot exceed $66,000 ($73,500 for those 50 and up).

•   Employees may take out a loan from either type of account, subject to IRS restrictions and plan rules.

Because there are certain overlaps between the two accounts, as well as many points of contrast, it’s wise to consult with a professional when making a tax-related plan.

Recommended: Different Types of Retirement Plans, Explained

How to Choose Between a Roth and a Traditional 401(k)

In some cases it might make sense to contribute to both types of accounts (more on that below), but in other cases you may want to choose either a traditional 401(k) or a Roth 401(k) to maximize the specific advantages of one account over another. Here are some considerations.

When to Pay Taxes

Traditional 401(k) withdrawals are taxed at an individual’s ordinary income tax rate, typically in retirement. As a result these plans can be most tax efficient for those who will have a lower marginal rate after they retire than they did while they were working.

In other words, a traditional 401(k) may help you save on taxes now, if you’re in a higher tax bracket — and then pay lower taxes in retirement, when you’re ideally in a lower tax bracket.

On the other hand, an investor might look into the Roth 401(k) option if they feel that they pay lower taxes now than they will in retirement. In that case, you’d potentially pay lower taxes on your contributions now, and none on your withdrawals in retirement.

Your Age

Often, younger taxpayers may be in a lower tax bracket. If that’s the case, contributing to a Roth 401(k) may make more sense for the same reason above: because you’ll pay a lower rate on your contributions now, but then they’re completely tax free in retirement.

If you’re older, perhaps mid-career, and in a higher tax bracket, a traditional 401(k) might help lower your tax burden now (and if your tax rate is lower when you retire, even better, as you’d pay taxes on withdrawals but at a lower rate).

Where You Live

The tax rates where you live, or where you plan to live when you retire, are also a big factor to consider. Of course your location some years from now, or decades from now, can be difficult to predict (to say the least). But if you expect that you might be living in an area with lower taxes than you are now, e.g. a state with no state taxes, it might make sense to contribute to a traditional 401(k) and take the tax break now, since your withdrawals may be taxed at a lower rate.
💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

The Benefits of Investing in Both a Roth 401(k) and Traditional 401(k)

If an employer offers both a traditional and Roth 401(k) options, employees might have the option of contributing to both, thus taking advantage of the pros of each type of account. In many respects, this could be a wise choice.

Divvying up contributions between both types of accounts allows for greater flexibility in tax planning down the road. Upon retirement, an individual can choose whether to withdraw money from their tax-free 401(k) account or the traditional, taxable 401(k) account each year, to help manage their taxable income.

It is important to note that the $23,000 contribution limit ($30,500 for those 50 and older) for 2024 is a total limit on both accounts.

So, for instance, you might choose to save $13,500 in a traditional 401(k) and $9,500 in a Roth 401(k) for the year. You are not permitted to save $23,000 in each account.

What’s the Best Split Between Roth and Traditional 401(k)?

The best split between a Roth 401(k) and a traditional 401(k) depends on your individual financial situation and what might work best for you from a tax perspective. You may want to do an even split of the $23,000 limit you can contribute in 2024. Or, if you’re in a higher tax bracket now than you expect to be in retirement, you might decide that it makes more sense for you to put more into your traditional 401(k) to help lower your taxable income now. But if you expect to be in a higher income tax bracket in retirement, you may want to put more into your Roth 401(k).

Consider all the possibilities and implications before you decide. You may also want to consult a tax professional.

The Takeaway

Employer-sponsored Roth and traditional 401(k) plans offer investors many options when it comes to their financial goals. Because a traditional 401(k) can help lower your tax bill now, and a Roth 401(k) generally offers a tax-free income stream later — it’s important for investors to consider the tax advantages of both, the timing of those tax benefits, and whether these accounts have to be mutually exclusive or if it might benefit you to have both.

When it comes to retirement plans, investors don’t necessarily have to decide between a Roth or traditional 401(k). Some might choose one of these investment accounts, while others might find a combination of plans suits their goals. After all, it can be difficult to predict your financial circumstances with complete accuracy — especially when it comes to tax planning — so you may decide to hedge your bets and contribute to both types of accounts, if your employer offers that option.

Another step to consider is a 401(k) rollover, where you move funds from an old 401(k) into an IRA. When you do a 401(k) rollover it can help you manage your retirement funds.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is it better to contribute to 401(k) or Roth 401(k)?

Whether it’s better to contribute to a traditional 401(k) or Roth 401(k) depends on your particular financial situation. In general, if you expect to be in a lower tax bracket in retirement, a traditional 401(k) may make more sense for you since you’ll be able to deduct your contributions when you make them, which can lower your taxable income, and then pay taxes on the money in retirement, when you’re in a lower income tax bracket.

But if you’re in a lower tax bracket now than you think you will be later, a Roth 401(k) might be the preferred option for you because you’ll generally withdraw the money tax-free in retirement.

Can I max out both 401(k) and Roth 401(k)?

No, you cannot max out both accounts. Per IRS rules, the annual 401(k) limits apply across all your 401(k) accounts combined. So for 2024, you can contribute a combined amount up to $23,000 (or $30,500 if you’re 50 or older) to your Roth 401(k) and your traditional 401(k) accounts.

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

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

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.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.

1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.

2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.

For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.

Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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Source: sofi.com

Apache is functioning normally

Portfolio beta refers to a popular metric that investors use to measure a portfolio’s risk, or its sensitivity to price swings in the broader market. While past performance does not indicate future returns, knowing a portfolio’s beta can help investors understand the price variability of their stocks, or how much their holdings may move if there’s stock volatility or big gains in a benchmark index like the S&P 500.

Investors often consider beta a measure of systematic risk, or risk that stems from the entire market and that investors can not diversify away. Macro events such as interest-rate or economic changes often fall into the category of systematic risk, while idiosyncratic, stock-specific risk includes events like a change in company management, new competitors, changed regulation, or product recalls.

Table of Contents

How to Calculate Beta of a Portfolio

The Beta of a portfolio formula requires relatively simple math, as long as investors know the Beta for each stock that they hold and the portion of your portfolio that each stock comprises.

Here are the steps you’d follow to calculate the Beta of a hypothetical portfolio:

1.    Calculate the total value of each stock in the portfolio by multiplying the number of shares that you own of the stock by the price of its shares:

Stock ABB: 500 shares X $20 a share each = $10,000.

2.    Figure out what proportion each stock in their portfolio represents by dividing the stock’s total value by the portfolio’s total value:

Stock ABB’s total value of $10,000/Portfolio’s total value of $80,000 = 0.125.

3.    Multiply each stock’s fractional share by its Beta. This will calculate the stock’s weighted beta:

Stock ABB’s beta of 1.2 X its fractional portfolio of 0.125 = 0.15.

4.    Add up the individual weighted betas.

Here is the whole hypothetical portfolio with a total beta of 1.22, benchmarked to the S&P 500. That means when the index moves 1%, this portfolio as a whole is 22% more risky than the index.

Stock Value Portfolio Share Stock Beta Weighted Beta
ABB $10,000 0.125 1.20 0.15
CDD $30,000 0.375 0.85 0.319
EFF $15,000 0.1875 1.65 0.309
GHH $25,000 0.3125 1.42 0.44375
Sum 1.22

4 Ways to Characterize Beta

Investors always measure a portfolio’s beta against a benchmark index, which they give a value of 1. Stocks that have a beta higher than one are more volatile than the overall market, and those with a beta of less than one are less volatile than the overall market.

Understanding beta is part of fundamental stock analysis. Once you know the beta of your portfolio, you can make changes in order to increase or decrease its risk based on your overall investment strategy by changing your asset allocation.

There are four ways to characterize beta:

High Beta

A high beta stock — one that tends to rise and fall along with the market often — has a value of greater than 1. So if a stock has a beta of 1.2 and is benchmarked to the S&P 500, it is 20% more volatile than the broader measure.

If the S&P 500 rises or falls 10%, then the stock would conversely rise or fall 12%. The same would be true for portfolio beta. While there’s more downside risk with high-beta stocks, they can also generate bigger returns when the market rallies – a principle of Modern Portfolio Theory.

Low Beta

A low beta stock with a beta of 0.5 would be half as volatile as the market. So if the S&P 500 moved 1%, the stock would post a 0.5% swing. Such a stock may have less volatility, but it also may have less potential to post large gains as well.

Still, investors often prefer lower volatility securities. Low beta investment strategies have shown strong risk-adjusted returns over time, too.

Negative Beta

Stocks or portfolios with a negative beta value inversely correlate with the rest of the market. So when the S&P 500 rises, shares of these companies would go down or vice versa.

Gold, for instance, often moves in the opposite direction as stocks, since investors tend to turn to the metal as a haven during stock volatility. Therefore, a portfolio of gold-mining companies could have a negative beta.

So-called defensive stocks like utility companies also sometimes have negative beta, as investors buy their shares when seeking assets less tied to the health of the economy. A downside to negative beta is that expected returns on negative beta securities tend to be weak – even less than the risk-free interest rate.

Zero Beta

A stock or portfolio can also have a beta of zero, which means it’s uncorrelated with the market. Some hedge funds seek a market-neutral strategy. Being market-neutral means attempting to perform completely indifferent to how an index like the S&P 500 behaves.
💡 Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.

How to Calculate an Individual Stock’s Beta

For investors, calculating the beta of all their stock holdings can be time consuming, and typically, financial data or brokerage firms offer beta values for stocks.

But if you wanted to calculate beta for an individual stock, you’d divide a measure of a stock’s returns relative to the broader market over a given time frame by a measure of the market’s return by its mean, also over a specific time frame. Here is the formula:

Beta = covariance/variance

Covariance is a measure of a security’s returns relative to the market’s returns.

Variance is a measure of the market’s return relative to its mean or average.

Recommended: What Is Covariance and How Do You Calculate It?

Alpha vs Beta vs Smart Beta

Beta is one of the Option Greeks, terminology frequently used by traders to refer to characteristics of specific securities or derivatives in the market. Another commonly used Greek term is Alpha. While beta refers to an asset’s volatility relative to the broader market, Alpha is a measure of outperformance relative to the rest of the market.

Beta also comes up a lot in the exchange-traded fund or ETF industry. Smart Beta ETFs are funds that incorporate rules- or factor-based strategies.

What Impacts Beta?

A variety of factors impact an asset’s beta. In general, stocks seen as riskier than average typically feature higher betas. Stock-specific factors such as debt levels, aggressive management, bold projects, volatile cash flows, and even ESG factors can influence a stock’s idiosyncratic risk. Higher business risk, while stock-specific, can lead to a more volatile stock price than the overall market, hence a higher beta.

Higher betas often appear in particular sectors. There are even investment fund strategies that play on beta – you can buy funds that exclusively own high beta or low beta stocks. A stock’s sector, industry, geographic location, and market cap size all impact a stock’s volatility and beta.

Cyclical and growth sectors like energy, industrials, information technology, and consumer discretionary often feature high betas. Utilities, consumer staples, real estate, and much of the healthcare sector typically have low beta.

Small caps and stocks domiciled in emerging-market economies also often have a higher beta (compared to the U.S. large-cap S&P 500).
💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Important Things to Know About Beta

1.    A stock’s beta may change over time. Because beta relies on historical price data, it is subject to change.

2.    Beta is not a complete measure of risk. It can be a useful way for investors to estimate short-term risk but it’s less helpful when it comes to considering a long-term investment because the macroeconomic environment and company’s fundamentals may change. In some cases, beta is not the best measure of a stock or a portfolio’s risk.

3.    Beta is an input when investors are using the Capital Asset Pricing Model (CAPM) — a way to measure the expected return of assets taking into account systematic risk. It’s a method that also looks at the cost of capital for investors.

4.    The estimated beta of a stock will be less helpful for companies that do not trade as frequently. Thin liquidity for a stock may bias its beta value since there is less robust historical price data.

5.    Beta does not offer a complete picture of a stock’s risk profile as it’s linked to systematic risk. Investors must also consider stock-specific risk when managing their portfolios.

The Takeaway

As discussed, beta is a popular metric that investors use to measure a portfolio’s risk, or its sensitivity to price swings in the broader market. Knowing stock holdings’ betas can be important information when you’re building your portfolios.

You can calculate their portfolio beta using simple math as long as you’re able to obtain the individual betas for your stock holdings. While beta is a helpful tool to try to gauge potential volatility in a portfolio, its reliance on historical data makes it limited in measuring the complete risk profile of an asset or portfolio.

Qualified investors who are ready to try their hand at options trading, despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to trade through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.

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

FAQ

What is a good beta for a portfolio?

In a general sense, a good beta for a portfolio would be 1. That’s only a general guideline or rule of thumb, however, as it means that a portfolio’s value is roughly as volatile as the market overall.

What does a beta of 1.3 mean?

A beta of 1.3 means that a portfolio’s value is 30% more volatile than the overall market, which means its value will swing more wildly than the market.

Why is market portfolio beta 1?

Beta measures a portfolio or asset’s sensitivity relative to the overall market. If a portfolio’s beta is 1, it is equally as volatile as the market, not more or less so.

How do I reduce my portfolio beta?

Perhaps the simplest way to reduce your overall portfolio’s beta is to replace higher-beta assets within the portfolio with assets that have lower associated beta.

Is it possible to have zero beta portfolio?

It is possible, and would amount to a zero-beta portfolio, which means the portfolio itself has no systemic risk whatsoever. In other words, this portfolio would have no relationship to the overall movements of the market, and likely have low returns.

What is the difference between stock beta and portfolio beta?

A stock beta is a measure of an individual stock’s volatility, while portfolio beta is a measure of an overall investment portfolio’s volatility.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.

1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.

2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.

For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.

Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
[cd_ETFs]
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Source: sofi.com

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When you hear of a company “going public,” one route is via an initial public offering, or IPO — but a company can also go public through a direct listing, where no new shares are created and underwriters are not required.

Direct listings, also known as the direct listing process (DLP), direct placement, or direct public offering (DPO), are a way for companies to raise capital by selling existing shares without the complexity of engaging investment banks and other intermediaries.

While a direct listing is typically less expensive than an IPO, and typically there’s no lock-up period, there is a risk in direct listing shares without the support of underwriters.

Table of Contents

What Is the Difference Between Direct Listings and IPOs?

A direct listing is one method by which a company can list shares of stock on a public exchange such as the New York Stock Exchange (NYSE) or Nasdaq directly, without using underwriters to create new shares, as you might with an IPO.

While some listing choices involve selling shares of stock to investors, IPOs and direct listings have many differences. The main difference between the two is that with an IPO a company issues and sells new shares of stock, while with a direct listing shareholders sell existing shares.

Comparing the Direct Listing and IPO Process

The differences between using a direct listing vs. an IPO to take a company public are pretty straightforward.

How a Direct Listing Works

If a private company is interested in going public, but doesn’t want the hassle of working with underwriters, they may choose to do a direct listing. With a direct listing, anyone who owns shares in the company can sell them directly to the public once the new company is listed on a public exchange. Shareholders may include investors, promoters, and employees.

By choosing a direct listing over an IPO, a company can avoid using an underwriter, which potentially saves money and time. Underwriters fulfill multiple roles in the IPO process, including working with the fledgling company to meet regulatory standards and set the initial price per share. These are important steps, but not necessary if a new company is only selling existing shares.

Further, because no new shares are created with a direct listing, existing shares won’t get diluted.
💡 Quick Tip: Access to IPO shares before they trade on public exchanges has usually been available only to large institutional investors. That’s changing now, and some brokerages offer pre-listing IPO investing to qualified investors.

How an Initial Public Offering Works

When a company offers shares of stock to the general public for the first time, it’s known as an initial public offering (IPO).

Before an IPO, a company is considered private, which means that shares of stock are not available for sale to the general public. Also, a private company is not generally required to disclose financial information to the public.

To have an IPO, a company must file a prospectus with the Securities and Exchange Commission (SEC). The company will use the prospectus to solicit investors, and it includes key information like the terms of the securities offered and the business’s overall financials.

Initial public offerings are a popular choice for companies looking to raise capital. The company works with an underwriter (typically part of an investment bank), who helps navigate regulations and figure out the initial price of the shares. They may also purchase shares from the company and sell them to investors (such as mutual funds, insurance companies, investment banks, and broker-dealers) who will in turn sell them to the public.

One benefit of working with an underwriter is the greenshoe option. This is an agreement that a company can enter into with the underwriter in which the underwriter has the right to sell a greater number of shares during the sale than they originally intended to, if there is a lot of market demand. This can help the company gain additional investment.

Working with an underwriter creates some security for the company, which is one reason so many companies go the route of the IPO.

Pros and Cons of Direct Listings

There are advantages and disadvantages for companies and investors when it comes to direct listings vs. IPOs.

Pros of a Direct Listing

Less expensive than an IPO for the company

Unlike IPOs, direct listings do not require underwriters, since no new shares are being created. Typically, an underwriter charges a fee between 3% and 7% per share. Depending on the scope of the IPO, these fees can add up to hundreds of millions of dollars.

In addition, underwriters often purchase shares below their agreed-upon market value, so companies don’t receive as much investment as they may have had they sold those shares directly to retail investors.

No lock-up periods for shares

If a company goes through an IPO, existing shareholders are generally not allowed to sell their shares to the public during the sale and for a period of time following the sale. These lock-up periods are required in order to prevent stock prices from decreasing due to an oversupply.

The direct listing model is essentially the opposite, in which existing shareholders sell their stock to the public and no new shares are sold.

Provides liquidity for existing shareholders

Anyone who owns stock in the company can sell their shares during a direct listing.
💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

Cons of a Direct Listing

There are also some potential drawbacks when it comes to direct listings.

Risk that shares won’t sell

With a direct listing, the amount of shares sold is based solely on market demand. Because of this, it’s important for a company to evaluate the market demand for its stock before deciding to go the route of a direct listing.

Companies best suited to direct listings are those that sell directly to consumers and have both a strong, recognizable brand and a business model that the public can easily understand and evaluate.

No help from underwriters with marketing and sales

Underwriters provide guarantees, promotion, and support during the listing process. Without an underwriter involved, the company may find that shares are difficult to sell, there may be legal issues during the sale, and the share price may see extreme swings.

No guarantee of stock price

Just as there is no guarantee that shares will sell, there is also no guarantee of stock price. In contrast, having an underwriter can help manage potentially extreme price swings.

This chart outlines the main points covered above.

Pros of Direct Listings Cons of Direct Listings
Less expensive than an IPO Potential for initial volatility
No lock-up periods Risk that shares won’t sell
Liquidity for existing shareholders No help from underwriters
No stock price guarantee

The Takeaway

Direct listings are an appealing alternative to IPOs for private companies who want to go public, thanks in part to lower costs and reduced regulations. A direct listing may also be appealing to retail investors who want to purchase shares from companies that are going public.

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

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

FAQ

Why would a company do a direct listing?

A direct listing offers a more direct path to going public on a stock exchange. The company doesn’t have to issue new shares, as only existing shares get sold in a direct listing. This eliminates the need for intermediaries like underwriters.

Can anyone buy a direct listing stock?

Yes, investors can buy a direct stock listing as they would any other stock listed on an exchange.

Is a direct offering good for a stock?

Since direct listings bypass the middleman and eliminate the need for underwriters, they can be less expensive for a company vs. IPOs, but the lack of marketing support could hurt the stock price and initial sales.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.

1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.

2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.

For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.

Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

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

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

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Source: sofi.com

Apache is functioning normally

As the capital of the Buckeye State, Columbus has its own special charm, offering everything from top-notch universities and cutting-edge research facilities to a dynamic arts scene and delicious food. Have you ever wondered, “Should I move to Columbus, OH?” If so, you’re not alone. Columbus holds a unique blend of urban culture with a touch of Midwestern charm, making it a welcoming place for anyone thinking of calling it home. Before making a move to this city, it’s a good idea to know what strengths and weaknesses Columbus has to offer. In this article, we’ll break down 10 pros and cons of living in Columbus to help you decide if it’s the right place for you.

Columbus at a Glance

Walk Score: 41 | Bike Score: 48 | Transit Score: 30

Median Sale Price: $273,000 | Average Rent for 1-Bedroom Apartment: $1,435

Columbus neighborhoods | houses for rent in Columbus | apartments for rent in Columbus | homes for sale in Columbus

Pro: Access to educational and research facilities

Columbus is known for being a center for education and research. This is anchored by The Ohio State University—one of the largest universities in the country. This provides locals with access to a range of educational opportunities, cutting-edge research, and community programs. The presence of such an institution not only enriches the intellectual life of the city but also drives innovation in various sectors, including healthcare, engineering, and technology.

Con: Unpredictable weather

Living in Columbus means experiencing a wide range of weather conditions, often unpredictable and sometimes extreme. Summers can be hot and humid, making outdoor activities uncomfortable, while winters are cold, with snow and ice a common occurrence. This variability can affect everything from daily commutes to outdoor plans, requiring residents to be prepared for anything. The changing seasons, while beautiful, can pose a challenge for those not accustomed to such fluctuations.

Pro: Beautiful green spaces and parks

The city is home to a diverse array of parks, ranging from expansive urban parks to scenic nature preserves. One notable example is the Scioto Mile, a riverfront park spanning over 175 acres along the Scioto River. This park features walking and biking trails, landscaped gardens, and interactive fountains. Additionally, Goodale Park offers a tranquil oasis with tree-lined pathways, a pond, and open green spaces for picnics and leisurely strolls. Columbus also boasts several metro parks, such as Highbanks Metro Park and Sharon Woods Metro Park. Whether enjoying a scenic jog along the riverfront, or simply unwinding amidst nature, Columbus’ green spaces and parks enrich the quality of life for everyone living there.

Con: Limited public transportation

While Columbus offers some public transportation options, the system’s reach and frequency can be limiting for those without personal vehicles. The Transit Score of 30 can pose a challenge for residents looking to navigate the city efficiently, particularly those living outside the central areas. The reliance on cars contributes to traffic congestion and can be a barrier for those seeking to reduce their environmental footprint or who don’t have a personal vehicle.

Pro: Diverse culinary options

Columbus’s culinary scene is a reflection of its population, offering a wide range of dining options that cater to various tastes and preferences. From food trucks in the Short North to fine dining establishments downtown, the city’s food landscape is vibrant and ever-evolving. Ethnic cuisines, such as Ethiopian, Nepalese, and Mexican, are well-represented, providing residents and visitors with a taste of global flavors right in the heart of Ohio.

Con: High property taxes

Residents of Columbus face relatively high property taxes compared to other areas in Ohio. This can be a significant consideration for potential homeowners, affecting affordability and the overall cost of living. The taxes fund important services, including schools and public safety, but they can also place a financial strain on families and individuals, impacting their ability to invest in property within the city limits.

Pro: Community events and festivals

Columbus is loved for its lively community events and festivals, which celebrate its diverse culture and bring people together. From the Columbus Arts Festival to the Ohio State Fair, there is always something happening. These events offer opportunities for entertainment, learning, and cultural exchange, fostering a strong sense of community and belonging among locals.

Con: Noise pollution

As a bustling urban center, Columbus is not immune to the issue of noise pollution. The sounds of traffic, construction, and urban activities can be a constant presence, particularly in the downtown and university areas. This can affect residents’ quality of life, especially those seeking a quieter, more serene living environment. The city’s exciting nightlife, while a draw for many, can also contribute to the noise levels.

Pro: Supportive business environment

Columbus is recognized for its supportive business environment, making it an attractive location for entrepreneurs and startups. The city offers a variety of resources, including incubators, networking events, and funding opportunities, to help new businesses grow. This entrepreneurial spirit is bolstered by a collaborative community that values innovation and supports local businesses, contributing to the city’s economic vitality and diversity.

Con: Seasonal insect issues

With its varied seasons, Columbus is home to a number of insect pests that can become particularly bothersome during warmer months. The high amounts of mosquitoes, ticks, and other pests can be a significant nuisance for some. Efforts to control these pests can be costly and require ongoing attention, impacting the enjoyment of the city’s many outdoor spaces.

Jenna is a Midwest native who enjoys writing about home improvement projects and local insights. When she’s not working, you can find her cooking, crocheting, or backpacking with her fiancé.

Source: rent.com