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Apache is functioning normally

October 4, 2023 by Brett Tams

It’s never too early to start learning smart strategies for managing one’s money. Most teens don’t get a formal education in topics like budgeting, investing, and choosing the right financial institution for their money, which is a missed opportunity.

That’s why it can be especially important for young people to take steps to build their own financial insights and skills. That can mean understanding the right amount to save and spend when earning a salary; what the challenges of managing credit can be; and how to invest money wisely.

This guide covers these aspects of financial literacy and more. Consider it a smart starting point as you build your money knowledge and know-how. Whether you’re thinking about buying your first car, affording college, or starting your own business someday, you’ll learn some of the key steps to bring your financial life into focus.

Why Is Financial Literacy Important for Teens?

Sad but true: Most people are launched into adulthood without being educated on personal finance. What’s more, in many households, money isn’t a topic that’s freely discussed, so kids don’t grow up hearing about how much their parents earn, spend, or save.

These are factors that can make it a challenge to gain financial knowledge and money management skills. However, learning about how to budget, save, invest, and spend wisely when young can set you up on the path to achieve your short- and long-term goals. That’s why you’ll learn some financial tips for teenagers right here.

The sooner you understand your way around money, the earlier you can get on the path to, say, travel around Europe for a summer, manage student loan debt, or even start saving for your dream house.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

5 Key Financial Tips for Teens

Making the most of your money as you start on the path to your independent life doesn’t need to be complicated. Here are five important financial literacy concepts for teens.

1. Opening a Bank Account

Financial planning for teens often starts with having a bank account. Not only will a bank account make it easier to cash those birthday checks from Grandma, it also provides a place to monitor money and start saving.

Most bank accounts billed as “teen accounts” are really just joint bank accounts, because teenagers under 18 typically need a parent or guardian to also be an account holder. This makes it possible to open a bank account for a minor.

Although it’s sometimes easier for teens to open an account at the same place their parents bank, it may be worth researching which banks in the area have the best benefits for teenagers specifically. Some points to know:

• The age for opening up an account varies from bank to bank, so make sure to check specifications on the bank’s website beforehand.

• Valid identification like a student ID, driver’s license, passport, birth certificate, and/or social security card is also required for account owners when opening a teen checking account.

• In some cases, a parent or guardian must be present to open the account, but some banks do offer the opportunity to open an account online. This will often require uploading the same documents to prove your identity.

• Some banks also offer parental controls, setting withdrawal and debit card limits, or even text alerts about account activity. Before opening an account, it may be worth considering what is most important and beneficial — definitely talk it over with a parent or legal guardian.

• Learning about any fees or minimum balances from the bank is also important step in personal finance for teens. Make sure to ask the right questions in person or check out the bank’s fee structure on their website. Ideally, you might want an account with no fees and the ability to earn a bit of interest (many checking accounts pay no interest). You are typically more likely to find such offers at online vs. traditional banks.

• Having a bank account means access to making deposits and withdrawals, plus online banking tools that can help with money management.

A word about debit cards: A teen checking account typically offers access to a debit card, which allows account holders to take out cash from ATMs and use the card for purchases in stores or online.

And since a debit card takes money directly out of the checking account for payments, it may help to download the bank’s mobile app, if available. This can help with checking account balances and, at some banks, setting up alerts if the account falls below a certain balance.

A bank account is a great first step in learning money management, whether it’s using a debit card, checking balances, transferring money, or setting up a direct deposit for paychecks. Especially with a new job, a weekly or bi-weekly paycheck comes with learning more financial responsibility. With a personal bank account, teens can pick up crucial financial skills before turning 18.

And, at many banks, once someone does turn 18, the account can turn into a standard checking account, which they can either choose to keep or leave for a new banking institution. (Important note: There may be new fees, so it’s important to keep an eye on what those might be.)

Recommended: What Is a Student Checking Account?

2. Budgeting For Teens

Another financial tip for teenagers involves learning how to balance income and expenses. Making a simple budget can help keep things on track. Whether it’s keeping tabs on a monthly allowance or income from a part-time job, knowing how much money is spent versus how much money gets made is a key part of money management. Plus, a budget can show how much money is available to save every month.

Many banks with mobile or online banking offer simple budgeting tools, such as categorizing money into simple buckets like “spendable” or “set aside.” One pretty practical budget suggestion is the 50/30/20 method. This helps to simplify spending categories: rather than trying to decipher every transaction and having hundreds of small budgets for individual items, the 50/30/20 method just divides monthly income into thirds.

• 50% of income would be put toward necessities, such as bills and other regular spending that’s hard to do without. For teens, this might mean car-related expenses, like insurance and gas, or a monthly cellphone bill. If 50% seems like a lot — especially if parents are still paying for big expenses like groceries and housing — consider putting an extra 10% into savings or other financial goals for now.

• 30% would be allocated for day-to-day spending, like going out to eat with friends, entertainment, shopping, and other fun activities.

• The remaining 20% would be allocated for financial goals, usually savings or debt payoff. Maybe this can be the start of a college fund, or saving up for a big purchase in the future?

3. Smart Savings

In tandem with having a budget, learning how to save money is an important part of financial planning. Opening both a checking and savings account may make it simpler to put money away.

Since a debit card is only tied to a checking account, that’s like an added buffer from the money in a savings account. Plus, learning to regularly transfer money into a savings account can help create healthy money habits.

When you have a regular paycheck, one of the simplest ways to save more is to set up direct deposit to divide the funds between a checking and savings account. If 20% automatically goes directly into savings, it requires little extra thought each pay period.

Automating your savings in this way takes away the need to manually transfer money. This can help eliminate any mental gymnastics surrounding the desire to spend money in your checking account immediately — it’s like it was never there in the first place.

Plus, in an emergency, a connected savings account can help prevent overdraft fees. If college is in the plans, saving now could mean taking out fewer loans in the future.

In fact, this thinking can be applied to any money goal, whether it’s a new phone, car, or a big post-graduation trip. Saving now can make it easier to achieve later.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

4. Being Cautious With Credit

Financial tips for teens are full of dire warnings about the perils of credit cards. But learning early on how credit cards work and how to manage credit is also part of mastering money management. Building credit now may open more doors in the long run.

For example, establishing a positive credit history can help make it more likely to successfully secure a loan for a car or rent an apartment down the road.

One way for teens to start is to get added as an authorized user on a parent’s credit card. The authorized user gets the benefits of the credit card and building credit history without the responsibility of being the primary cardholder and making payments.

However, since late payments may impact both credit scores, teens can also set up an arrangement to pay off any debt incurred using the card each month.

In fact, it’s getting harder for people under the age of 21 to get a credit card, because federal law under the Credit CARD Act of 2009 requires credit card issuers to verify that the applicant has the following before a credit card is issued:

• A cosigner’s signature. The cosigner can be a parent, guardian, etc. as long as they are able to pay the applicant’s debt from the card.

• Official financial information proving that the applicant can repay the debt on their own.

The submitted application must be written. And if a person under 21 is approved for a card, they can’t get a credit limit increase without written approval from the cosigner.

Eventually opening an individual credit card without a cosigner, of course, means a lot more financial responsibility. Paying a credit card in full each month, as opposed to carrying a balance, is an important financial habit to get the hang of, as paying in full each billing cycle means the cardholder won’t pay interest on a balance and it can help build credit score.

Until then, an authorized user receives a separate credit card in his or her name, but there may be no need to even use the card. Just having it issued can help build credit if the main cardholder is keeping up with their payments. As credit builds, it’s smart to monitor credit reports and scores for errors or fraud. It might be a good idea to start monitoring credit through a free site like FreeCreditReport.com .

5. Setting Up a Side Hustle

If a part-time job or summer gig isn’t an option just yet, whether due to age, school work, or other restrictions, there are other options for earning extra cash. One of the benefits of a side hustle is being able to bring in income. And any income, however small, could help build good personal finance habits like budgeting and saving.

For ideas, look to needs in the community, such as assisting older adults with technology, babysitting, tutoring, or lawn care. Helping on a moving day, walking dogs, or washing cars are also great ways to step up from a beginner’s lemonade stand.

You might also consider your hobbies: Do you paint landscapes in your free time? Make jewelry? You could possibly sell your work to bring in some cash.

For those nearing college and looking for a part-time or entry-level job, it may be worth considering a company that offers tuition support or reimbursement for their employees.

Building smart financial planning skills now may make it even easier down the road when starting a full-time job — with budgeting and saving.

Can You Invest as a Teenager?

Many teenagers are curious about investing and how they might build wealth that way. Here are a few things to know if you’re wondering how to invest as a teenager:

• If you are under age 18, you cannot be the sole owner of a standard brokerage account.

• With adult supervision, you may open what is known as a custodial account. This means that the adult oversees the account while you are under 18. When you turn 18, you can likely take over control of the account with the adult’s approval.

By collaborating with an adult in this way on investments, you can learn the basics and begin to experiment. The conventional wisdom is that, the younger you are, the more risk you can afford to take with investing, since you have time to recoup any losses and ride out the ups and downs of the market.

Just do keep in mind that investment does have inherent risk, as your portfolio isn’t insured the same way money in the bank is.

Once You Are Old Enough to Invest, Where Do You Start?

If you are old enough, here’s how to invest as a teenager. Keep these tips in mind:

• Do your research. There is plenty of information about investing available online, via apps and classes, in books, on podcasts, and beyond. Find reputable resources and educate yourself on how to invest money as a teen. This can include both principles of investing as well as different kinds of investments to consider.

• Set goals. When you begin investing, it’s wise to figure out your goals, and you may indeed have more than one. Perhaps you want to invest in the short-term to help generate money to pay back student loans. And maybe you also want to begin saving to start a business when you are 35. Those different goals and timeframes can influence how you invest.

• Opening a brokerage account. Once you are old enough, you will have a choice about the sort of account you open and how it is managed. Whether you want to work with a financial professional or try robo advising, spend time understanding the pros and cons of your options.

When you make a decision, you’ll be ready to invest money as a teenager, but it doesn’t have to be set in stone. You can shift gears and try other methods as well.

Making Smart Money Moves With SoFi as a Teen

While SoFi doesn’t offer bank accounts for minors, take a look at what we offer for when you are of legal age to open an account. Or, if you are age 15 or older, see if you might be added as an authorized user to an adult’s account.

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

Better banking is here with up to 4.50% APY on SoFi Checking and Savings.

FAQ

What should high school students know about financial literacy?

It is important for high school students to learn about opening bank accounts, budgeting, saving, managing credit wisely, and bringing in income.

How can a 16-year-old invest money?

A 16-year-old typically cannot open their own brokerage account. However, they can open a custodial account with a trusted adult.

How would you invest $1,000 as a teenager?

A teenager typically cannot invest money on their own; they would have to open a custodial account with a trusted adult. Then, they would have to identify a goal for the funds (to generate income ASAP? To grow slowly for use later in life?) and select the right kind of investments.

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Apache is functioning normally

October 3, 2023 by Brett Tams

After teaching my “Saving and Investing 101” class at the University of Rochester yesterday, two undergraduate students ask me personal investing questions:

“How should I invest the money in my Roth IRA?”
“My portfolio is currently in 7 stocks, all tech stocks. My dad thinks I should diversify. Should I? And how do I do that?”

I bet you’ve had similar questions before. Investing is a confusing topic.

Thankfully, many personal investing questions have a similar answer. So whenever anyone asks me for specific investing advice, I go over the following ideas.

It’s About You

Giving personalized investing advice can only occur after understanding the investor. One idea I shared with the class yesterday is:

“If 100 college students asked me how to invest their Roth IRAs, I know this: I would eventually tell most of them that a diversified stock portfolio is an ideal place to start. They’re young with long investing timelines, and the higher risk/reward aspect of stock investing makes sense for them.

But, some of those 100 students might need completely different advice based on their unique circumstances. Telling the whole group, “Invest in stocks,” would be a disservice to some individuals. That’s why personalized investing advice should come after – not before – understanding the individual investor.”

Goals, Timelines, Risk Tolerance

How, then, do we determine the specific investing advice for individual investors? How do we “understand” or “get to know” them?

You need to understand their goals and risk tolerance.

A financial goal is a combination of an amount of money and a timeline for a specific purpose. E.g. “I need $1.5M by 2035, because that’s when I want to retire.” The amount and timeline provide concrete numbers from which we can do objective math.

Risk tolerance is a bit harder to pin down. It’s personal and emotional. To unwrap someone’s risk tolerance, it helps to ask questions about their investing past (“Have you lived through bear markets or crashes – how did it make you feel?”). Short of that, running through hypotheticals can help (“If your account dropped 30%, but you knew it would likely recover in ~3 years or less, how would you feel?”). There are also many risk tolerance quizzes and questionnaires on the internet.

The goals and timelines lead to a math-based, objective investment recommendation. Short-timelined money should be invested in low-risk, low-reward assets, and long-timelined money in high-risk, high-reward assets. This is the basis of “bucketing your money.” If (or when) your goals change, your investment allocation should change too.

Risk tolerance adds a subjective, psychology-based aspect to an investment recommendation. Perhaps the math alone points an investor toward an 80% stock, 10% bond, 10% alternatives portfolio. But if they’re incredibly risk averse, that 80% stock allocation will turn their brain to mush when a bear market hits. (Not if a bear market hits; when.) A more conservative allocation would help their mental health.

How conservative? It’s impossible for me to say. It depends (!!!) on the person. There’s a balance between the math (can you hit your goals on time?) and the psychology (will you be able to sleep along the way?).

The crux of investing is not creating a Scrooge McDuck pile of gold.

Instead, investing is about maximizing the odds of achieving your financial goals while minimizing your sleepless nights.

Back to the Students…

How should the first student invest her Roth IRA?

Assuming her Roth IRA money is purely for retirement**, I think an 80-100% diversified stock allocation makes sense. A total market index fund would be a good choice.

**Most IRAs are. Withdrawals before age 59.5 are penalized. They are retirement accounts.

How should the second student diversify away from her 7 tech stocks?

This one is more nuanced. First, the money is not in an IRA. It might have a short-term timeline associated with it. She and I discussed this. The money is all long-term.

From there, the same idea of an 80-100% diversified stock allocation makes sense.

But! This student might enjoy the fact that she owns those 7 tech stocks. Similarly, I enjoy the fact that I own Berkshire Hathaway – it’s the only non-fund investment I own, the only single stock.

If her stock ownership is important to her, I think it’s reasonable for her to keep <10% of her portfolio in those 7 stocks. The remaining >90% of her investable assets should be diversified.

Different people. Different situations. Different advice.

Thank you for reading! If you enjoyed this article, join 7000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.

-Jesse

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Source: bestinterest.blog

Apache is functioning normally

October 3, 2023 by Brett Tams

The moving average is a tool that can help investors decide whether and when to buy or sell a stock. It presents a smoothed-out picture of where a stock’s price has been in the past and where it’s trending now. Investors may compute moving averages over a variety of time frames, and they are useful to both long-term and short-term investors.

What Is a Moving Average?

A moving average is a metric often used in technical analysis. For a stock, it’s a constantly updated average price.

Unlike trying to track a stock price day-to-day, a moving average smooths price volatility and is an indicator of the current direction a price is headed. A moving average reflects past prices — usually a stock’s closing price — so it’s not a predictor of future direction, just what’s happening now or in the past.

You can compute moving averages using almost any time frame. Common time frames include 20-day, 30-day, 50-day, 100-day and 200-day moving averages.

While a moving average is useful on its own when analyzing different types of investments, it also forms the basis of other types of technical indicators, such as the Moving Average Convergence Divergence (MACD) and the McClellan Oscillator.
💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Types of Moving Averages

There are three common types of moving averages that investors might consider when deciding when to buy or sell a stock:

Simple Moving Average:

As the name states, this is the simplest type of moving average. You can calculate the simple moving average by finding the arithmetic mean of a set of data points. For instance, if you had an average daily price for a stock each day for the last 30 days, you would add them all together and divide by the number of days.

The Simple Moving Average (SMA) formula is as follows:

P = Price on a given date

n = The time period

Example: Suppose you were trying to find the simple moving average of a stock price over 10 days.

N = 10 days

Prices (in dollars) = 11, 12, 15, 13, 12, 7, 10, 11, 13, 12

SMA = (11 + 12 + 15 + 13 + 12 + 7 + 10 + 11 + 13 + 12) / 10

SMA = 11.6

Weighted Moving Average

A weighted moving average (WMA) gives more weight to certain price prices. If you overweight recent prices, for example, the measure becomes more responsive to recent price moves and less prone to the lag effect.

Exponential Moving Average:

An exponential moving average is a type of weighted moving average that calculates changes in a price cumulatively, rather than based on previous average. That means that all previous data values impact the EMA, since there is less variation over time.

Why Would an Investor Use a Moving Average?

Using a moving average to analyze a stock can help you filter out the “noise” that comes from random price fluctuations. By looking at the direction of the moving average, you can get a sense of whether the price is generally moving up or generally moving down. If a moving average is moving sideways (neither up nor down), the price is probably sticking within a window and not fluctuating much.

A moving average is sometimes plotted as a line by itself on a price chart to illustrate price trends. And different moving average lines can be used in tandem to spot changes in direction. For instance, an investor might be looking at a faster moving average (one with a shorter period, such as 10 days) versus a slower moving average (one with a longer period, such as 200 days). When these lines cross each other, it’s called a moving-average crossover, and can indicate that the trend is changing or is about to change.

Moving averages can also indicate support or resistance levels. Support levels are a price level where a downward trending line would be predicted to pause, due to demand or buying interest. A resistance level is a price ceiling where an upward trending line would be expected to plateau due to selling interest. Over time, watching moving averages can help investors identify these levels of support and resistance, and use them to make buy/sell decisions.
💡 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.

Pros of Using a Moving Average

A moving average offers several benefits to investors.

It smooths the data.

Day-to-day price swings can be confusing to track, and make it difficult to determine a stock’s direction. A moving average smooths out volatility, giving you a better look at how a stock is trending.

It’s a simple gauge.

As an analytical tool, a simple moving average is easy to interpret. If a stock’s current price is higher than an upward trending moving average line, the stock is headed up in the short-term. If a stock’s price is lower than a downward trending moving average line, the stock is headed down in the short-term.

Easy to calculate.

A moving average is a relatively easy metric, so the average investor can calculate it on their own.

Cons of Using a Moving Average

It’s important to keep the drawbacks of moving averages in mind when using them to determine whether to buy shares of a company.

They’re not predictive.

As with all investments, past performance is not an indicator of future performance, so a moving average — no matter which type you use — can’t tell you what a stock will do next.

There’s a lag.

The longer the period your moving average covers, the greater your lag — meaning how responsive your moving average is to price changes. A 10-day exponential moving average, for instance, will react quickly to price turns, while a 200-day moving average is more sluggish and slower to react to changes.

There’s trouble with price turbulence.

If prices are trending in one direction or another, a moving average may be a helpful metric. But if prices are choppy or volatile, the moving average becomes less useful, since it will swing along with the price. Allowing for a lengthier time frame may resolve this issue, but it can still occur.

Simple moving averages weigh all prices equally. This can be a disadvantage if a stock’s price has taken a significant but recent shift.

Weighted moving averages may send false signals.

Since WMAs put more weight on more recent data, they’re faster to react to price swings, which can occasionally be misleading.

The Takeaway

Moving averages are just one metric you can use to evaluate a stock. They can help quiet the noise of price fluctuations and show you what a stock is doing over time. That said, in some environments or with specific price patterns, moving averages may lag or send a misleading signal.

With that in mind, knowing what a moving average is can be helpful when learning how to size-up potential investments. It’s critical to consider the pros and cons, of course, but moving averages can be another tool in an investor’s tool chest.

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), 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.

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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. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

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 $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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

SOIN0623010

Source: sofi.com

Apache is functioning normally

October 3, 2023 by Brett Tams

Interest rates can have a real impact on inflation. Learn how it works and what changing interest rates could mean for you.

October 3, 2023

When inflation is on the rise, everything from groceries to gas can get more expensive. And while a little inflation is normal, the Federal Reserve Board (also known as “the Fed”) tries to prevent steep increases in prices. Inflationary spikes can occur due to several factors, including supply chain issues, a booming labor market, and a low interest rate environment.

The Fed monitors inflation by tracking the average costs of goods and services. One of the most relied-upon measures of inflation is the Consumer Price Index (CPI), which looks at common expenses like food, energy, transportation, shelter, and health care.

When inflation is high, as it was in 2021 and 2022—with the headline number peaking in June 2022 at 9.1%, per a Bankrate article citing the Bureau of Labor Statistics (BLS)—consumers’ dollars don’t go as far because goods and services are more expensive. This not-so-fun reality tends to put a damper on economic growth, and people with a lower income are disproportionately burdened because they cannot afford higher prices. But it’s not a great situation for anyone.

So, how does raising interest rates affect inflation? Let’s start with why inflation can happen in the first place.

Why is inflation so high?

The pandemic sparked a chain of events—including supply chain disruptions, disruptions in production, and pandemic stimulus packages, per Bankrate—that helped lead to the inflationary spike between 2021 and 2022.

First, the global supply chain, which encompasses all stages of manufacturing, assembly, and logistics that make it possible for goods to be delivered around the globe in a timely fashion, was severely impacted by illness, business closures, and travel restrictions, per Bankrate. Simultaneously, demand for goods increased as people—many working from home—began ordering more things online to be shipped directly to their front doors.

It’s economics 101: When demand goes up and supply goes down, prices rise. And that causes inflation.

Then, as the pandemic started to ease, another event that would lead to price shocks occurred: Russia’s invasion of Ukraine. Russia is a major supplier of the world’s oil. As more countries placed war-related sanctions on Russia, oil prices rose—a lot. According to Bankrate, the price of a barrel of oil nearly doubled from February 2022 (when the war began) to July 2022.

Meanwhile, the upward trajectory of a robust job market and a roaring stock market in the U.S. meant that many consumers could afford to pay higher prices at the stores and the pumps. This combination of forces can propel prices even higher and keep economists and policymakers at the Fed up at night.

Luckily, the Fed has a tool to combat runaway inflation: interest rates.

What happens to inflation when interest rates rise?

The Federal Reserve’s job is to keep inflation manageable so that consumers are encouraged to spend and save. Interest rates—which represent the cost of borrowing money—are reflected in the annual percentage yields (APYs) of savings accounts and mortgage rates. (Learn more about how the Federal Reserve can affect mortgage rates.)

How does raising interest rates affect inflation?

When interest rates go up, borrowing money gets more expensive. How does this increase in interest rates affect you? Mortgages, car loans, and business loans aren’t as attractive. As a result, fewer consumers are willing to take out loans to buy or invest in things. Higher interest rates tamp down demand, which usually leads to a dip in prices as well.

Consumers are affected in other ways, too. Because interest rates on savings accounts, certificates of deposit (CDs), and money market accounts tend to increase, people move more of their money into these savings products to reap the benefits. Here’s how raised interest rates can affect those different accounts:

Savings Accounts

Banks’ interest rates typically track what the Federal Reserve is doing. So if you’re wondering when savings account interest rates will go up, it’s usually after a Fed rate hike. Money in a high-yield savings account during periods of higher interest rates will yield more returns as your funds compound over time.

CDs

CDs offer a guaranteed interest rate for the entire term of the CD, no matter what is happening in the stock market or if interest rates are rising (or falling). That said, these savings vehicles are especially beneficial when CD rates are high because you can lock in that rate over a set period—typically between three months and 10 years.

Choose your term, lock in your rate, and watch your CD grow

Discover Bank, Member FDIC

Money Market Accounts

Money market accounts also benefit from higher interest rates. They can feature an APY that’s competitive with savings accounts, but they can also include a debit card like a checking account for easy access to your money. To get the most out of a money market account, choose one with a high APY that doesn’t include fees.

When will inflation go down?

Inflation doesn’t last forever. In fact, after a series of interest rate hikes by the Fed, inflation had simmered down to 3% by June 2023, its lowest since March 2021, according to the BLS.

Economic experts predict, however, that inflation could continue through 2024, according to Bankrate. And the Federal Reserve may raise interest rates at least once or twice more, according to a Bankrate poll.

Keep saving through the ups and downs of inflation

Though no one knows for sure when inflation will go up or down, here’s one piece of advice that’s always wise during uncertain economic times: Stay the course. That means continuing to save for retirement and spend money wisely to make your financial goals a reality.

Looking for a safe place to keep your savings that also offers a high interest rate so your money can grow over time? Look no further than a high-yield online savings account.

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.

Source: discover.com

Apache is functioning normally

October 3, 2023 by Brett Tams

Optimization, Document Tracking, MSR Financing Products; Saving Money on Credit Reports and CE

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Optimization, Document Tracking, MSR Financing Products; Saving Money on Credit Reports and CE

By:
Rob Chrisman

Mon, Oct 2 2023, 10:32 AM

As President Jimmy Carter celebrated his 99th birthday seven months into hospice, welcome to the 4th quarter! (Will lenders experience any “Q-4-ia”? Say out loud.) Let’s talk U.S. lists! California, Indiana, Michigan, Texas, and Virginia are top five in pumpkin growing. The National Association of Realtors, U.S. Chamber of Commerce, Pharmaceuticals, American Hospital Association, and Blue Cross/Blue Shield are the leading five lobbying spenders. And you can add the Internal Revenue Service’s Income Verification Express Service (IVES) to the list of “essential” government activities that would continue to operate in the event of a government shutdown. We won’t have to worry about that until mid-November, as the government kicked the can down the road and passed a Continuing Resolution that averts a government shutdown to November 17. HUD (Ginnie Mae and FHA included), USDA, and the VA will continue to operate temporarily uninterrupted, and for a bonus the bill also includes $16 billion in disaster aid and an extension of the National Flood Insurance Program (NFIP). (Today’s podcast can be found here and this week’s is sponsored by TRUE. TRUE creates accurate data that powers automation and optimizes every step of the lending lifecycle, helping lending organizations rapidly process loans, dramatically cut costs and risk, and radically improve the customer experience. Hear an interview with Keyspire’s Michael Sarracini on housing affordability problems and the best advice for young potential homeowners.)

Lender and Broker Software, Programs, and Services

“ACUMA Matata! What a wonderful phrase!” This phrase captures the essence of the ACUMA Annual Conference, where Dark Matter is currently meeting with its Credit Union clients and prospects. Credit unions gather at this event to explore new horizons in loan origination. In this dynamic financial landscape, credit unions require a powerful, adaptable LOS that caters to their unique needs. Enter Empower LOS, Dark Matter’s King of the Jungle. Empower embodies next-gen solutions, automating tasks, and ensuring precision with “lights-out processing.” It enhances loan origination, improves quality, reduces turnaround times, and supports compliance while boosting member satisfaction. Our integrated suite of tools complements Empower, elevating lending operations. From automation assistants to machine learning-powered document management, we have it all. Ready to transform your lending game? Connect with us and we’ll explore how Empower and Dark Matter Technologies can redefine credit union lending. “ACUMA Matata!” No worries: our tech-forward solutions make lending possibilities endless.

Your bank can be more than just a bank. With powerful national resources and personalized, one-on-one relationships with industry experts, you have a strategic edge. Western Alliance Bank Specialized Mortgage Services delivers stable, trusted treasury management and mortgage banking services that can keep pace with your company’s growth needs and help keep your operations running smoothly while taking advantage of competitive rates. Advanced payment technology provides streamlined online wire transfer origination with just a few clicks as well as embedded finance, API, file-based and online platform options, all customizable to meet your current and future priorities. You’ll also appreciate our options for warehouse lending, MSR financing, note financing and other mortgage finance products that offer speed to approval and certainty of execution. Contact Mark Short(469) 702-6212, Nick Richards (646) 708-1211, Nicole Avey (720) 633-4759, Elizabeth Mix (480) 329-2122, Jim Karr (626) 390-8534 and Chris Martin (480) 341-5483. Western Alliance Bank, Member FDIC.

“Falcon Capital Advisors’ team of experienced advisors can take your digital mortgage goals from vision to reality. Our team of subject matter specialists has provided guidance to major lenders and investors, expertly guiding them through the various processes and potential obstacles to quickly stand up their digital mortgage programs. Our comprehensive suite of services includes eMortgage readiness assessments, strategic roadmap development, vendor selection support, program implementation, and securing investor and MERS approval. Our experts can mitigate risks and achieve faster (and less expensive) results and even revitalize stalled eMortgage efforts. Contact Jim Voth to learn more.”

To deliver the best borrower experience and remain compliant, servicers and investors must release liens in a narrow window after payoff. NTC, the leader in lien and assignment release services for 35 years, now offers lenders two options: their traditional full-service offering, and a self-serve, “share-the-work” option: PerfectDocs. The first, complete web-based lien solution, PerfectDocs enables the creation and tracking of all documents needed to complete a lien release and mortgage assignment including reviewing, executing, and notarizing documents and sending them to counties for e-recording for non-MERS and MERS loans. It also features intuitive queues for exceptions, downstream mailings to borrowers or custodians, recording confirmations and fee reconciliations. The platform allows users to share the work with NTC’s team during volume fluctuations or request assistance on complex “cures.” Interested in 100 percent client control with on-demand integration to full service to cure exceptions? Request a PerfectDocs demo to learn more and see how we can share the work!

Fall has arrived, kicking off the football and conference season! And that means plenty of opportunities to grab a pumpkin spice latte and meet up with the Computershare Loan Services (CLS) team at some of the industry’s most significant events. This year, MBA’s Annual Convention is in Philadelphia on October 15-18, and CLS wants to meet you there. Contact them at [email protected] to schedule time together in the city of brotherly love. They’ll tell you all about CLS’ subservicing solutions, origination fulfillment services, co-issue MSR acquisition program, and mortgage cooperative that can help you stay one step ahead.

Free eBook: Market-Proof: How to Build a Flexible Lending Business Resilient in Upcycles & Downturns. The exaggerated upcycles and downturns of the past few years underscore just how crucial it is for lenders to build resilience and flexibility into their businesses. To overcome today’s challenges, lenders need to hone their lending process at each step. In this new eBook, Maxwell provides 12 tips from industry veterans to help you optimize your mortgage process from loan application to the secondary market. You’ll get insight from exclusive interviews with industry veterans on how to increase efficiency, access economic scale, and become resilient to market volatility like never before. Click here to download Maxwell’s new eBook “Market-Proof: How to Build a Flexible Lending Business Resilient in Upcycles & Downturns.”

Saving Pennies Into Saving Dollars

My cat Myrtle thinks nothing of enjoying the benefits of minced, line-caught halibut from the 48-degree waters off Kodiak, Alaska. No expense spared. But for lenders and vendors, staring at an autumn and winter with relatively high rates, saving pennies is critical especially if it means saving jobs and many money-saving ideas are simple and right under your nose.

Mike Metz, with VIP Mortgage, and Faith Howard-Mooney, with The Mortgage Collaborative, recently led a discussion at TMC’s Nashville event on cost saving ideas. For example, are you bundling or cascading credit reports and verification providers? Are you looking at alternatives for courier and shipping vendors? Or, looking at alternatives for tax transcripts? You’d be surprised to hear how much these seemingly small things can add up. (If you want to get involved in conversations like these, contact Faith to learn how you can get involved, or about TMC’s next event in Louisville.)

The conversation continues. Lenders are still seeking ways to reduce costs in the current market environment. Lenders One helps its membership with various benefits, such as free NMLS CE Courses via OnCourse Learning. Consider the math. If you have 100 MLOs needing continuing education at an average $100 per course, you’d spend $10,000 just on CE courses. As a member, your MLOs would take NMLS CE Courses at no cost to your company! Also, with L1 Credit, an approved credit reporting agency with a full suite of credit, flood, fraud, and verification solutions, L1 can offer members pricing that is consistently less than other offerings while still providing industry-leading customer support. L1 Verifications includes the top VOE/I and VOA products in an available waterfall sequence for more savings opportunities. L1 Events? Don’t miss the Executive Roundtable in San Diego, 11/7-8, and registration is open for L1 Summit 2024 in LA, 3/3-6. Visit L1 or contact Tricia Migliazzo to learn more.

Capital Markets

The month and quarter ended on Friday, and it was, to put it mildly, an awful month for bonds and MBS, and therefore mortgage rates. The Fed’s restrictive monetary policy has tightened financial conditions by design, and 30-year fixed rate mortgages closed the month at nearly 7.5 percent, up roughly 30 basis points over the past 30 days. The 10-year currently sits around 4.6 percent, a far cry from the 1.5 percent yield it paid in the weeks leading up to the Fed’s initial rate hike in March 2022 (or the 51 basis points low in August 2020, or even the 3.31 percent it closed at on April 6); it closed Friday +13 basis points for the week and +48 basis points for the month. The Fed is showing no sign that it is going to pivot back to an easy money policy anytime soon. The first fed funds cut is forecasted for next summer (2024).

Is a soft landing becoming less likely? The effects of the auto workers strike, higher energy prices, and student loan payment resumption may ripple through the economy in the form of lower consumer spending and a slowdown in hiring. The potential federal government shutdown in mid-November may eventually throw a curveball at the Fed, which admittedly relies on economic data reports to enact forward looking policy.

Meanwhile the year-over-year core PCE index, which excludes food and energy, declined to 3.9 percent in August, its lowest annualized pace since early 2021. The latest update to second quarter GDP was unrevised at 2.1 percent annualized growth, however consumer spending growth was revised down from 1.7 percent to 0.8 percent. Durable goods orders in August rose 0.2 percent, exceeding market expectations for a 0.5 decline as new orders for defense aircraft and parts jumped 19.2 percent. Excluding defense, orders for capital goods increased 0.9 percent as businesses continued to invest in equipment. The resilience of the economy up to this point has increased the prospects of a “soft landing” in the eyes of some Fed officials, however recent economic headwinds have increased the level of uncertainty which could have implications for future Fed policy.

This week culminates with the September payrolls report on Friday, and expectations are for 170k in the headline figure. Several labor market indicators are also on the calendar including JOLTS job opening on Tuesday, ADP employment on Wednesday, and Challenger job cuts on Thursday. Other releases of interest include PMIs, construction spending, factory orders, trade, and consumer credit. Fedspeak is on the heavy side, including four speakers today. Regarding MBS, Agency prepayments will be released after Thursday’s close. Today’s calendar kicks off with the final September S&P Global manufacturing PMI later this morning and will be followed by ISM manufacturing PMI for September and construction spending for August. We begin the day, week, month, and quarter with Agency MBS prices worse than Friday night by .125-.250 and the 10-year yielding 4.62 after closing Friday at 4.57 percent.

Job Openings

“Pezian Search Group continues to have success in this difficult market. With thousands upon thousands of Client contacts and candidates from coast-to-coast throughout the United States, we are the go-to hiring experts in the Mortgage, Banking, Credit Union, Title & Escrow, Financial Services and Technology spaces that help companies succeed and people grow in their careers. We offer flexible search options, added benefits to long-term Clients, as well as a satisfaction guarantee on our placements that cover both skill set and culture fit. From Loan Officers to Loan Operations, Front-office to Back-office, the Call Center, the C-Suite, and everything in between, let us show you how we can make an impact for your organization. Clients and Job Seekers can connect with us and our Leadership on LinkedIn, reach our team, by completing the contact forms on our website, and reviewing our current openings.”

A large, well-known financial institution is looking to purchase a small wholesale mortgage banker who is in good standing, has its “tickets” with Fannie, Freddie, and Ginnie, and (preferred) has a national footprint with licensing. Loan production volume is not a priority. Strong chance that employees, ownership, and AEs will be retained, as will the name of the seller. Seller/servicer a plus. Interested parties should send me a confidential note for forwarding.

Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

October 2, 2023 by Brett Tams

Timing the market, as it relates to trading and investing, requires a whole lot of luck. In effect, it means waiting for ideal market conditions, and then making a move to try and capitalize on the best market outcome. But nobody can predict the future, and it’s a high-risk strategy.

When seeing stock market charts and business news headlines, it can be tempting to imagine striking it rich by timing investments perfectly. In reality, figuring out when to buy or sell stocks is extremely difficult. Both professional and at-home investors make serious mistakes when trying to time their market entrance or exit.

Why Timing the Stock Market Doesn’t Work

Waiting to start investing could cost an individual thousands of dollars over their lifetime. It’s also important to know that by leaving money in a checking or savings account, a person is not protecting their money from inflation risk. That’s because the value of that cash in a checking or savings account erodes if the prices of goods and services increase.

Meanwhile, stock market timing is incredibly complex. Stock prices can be influenced by global macroeconomic events, political events in a country, developments in specific industries or companies, as well as the sentiment of investors as a collective.

Even professional investors struggle to “beat the market,” which often means simplifying trying to outperform a benchmark stock index. In fact, most investors can’t beat the market, and are likely better off sticking to index investing.

Fear and Greed in Investing

When investing, it’s also important not to let two key emotions – fear and greed – drive decisions. That means if the stock market is plummeting, investors may be fearful, but they can’t let those feelings push them toward a decision to sell. That could cause them to “lock in” losses. There’s even a Fear and Greed Index that investors sometimes use to make contrarian decisions.

Take for instance what happened during the 2008 financial crisis. After Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008, the stock market entered a tumultuous stretch. The S&P 500 finally bottomed on March 9, 2009. However, the index eventually regained all its losses in the course of roughly the next four years. Investors who had hung on likely may have recovered their losses.

Meanwhile, greed can cause investors to make poor decisions as well. For instance, during the dotcom bubble, investors bought into many newly public Internet companies without always doing the research. Some of these stocks weren’t even turning a profit, making their businesses vulnerable to going belly up. Ultimately, many at-home investors suffered losses when the dot-com bubble burst.

Of course there are no guarantees when it comes to investing. There’s always risk and volatility involved. However, one of the most tried and true methods for building wealth has been a buy-and-hold strategy when it comes to stock investing.

💡 Quick Tip: When people talk about investment risk, they mean the risk of losing money. Some investments are higher risk, some are lower. Be sure to bear this in mind when investing online.

Why It May Be a Good Idea to Invest Immediately

One of the most important predictors of your returns is the length of time you’ve invested in the stock market. While it’s difficult to predict what the market will do in the near future, an investor can get a better sense over the long term.

When an investor lets their money grow, it has the chance to weather short-term ups and downs and grow over time. On average, the S&P 500, often used as a market benchmark, has grown 7% a year after adjusting for inflation. That doesn’t mean a person can predict what will happen this year, or even in the next 10 years, but looking at long term trends can give them a better sense of market dynamics.

An individual might put off investing because they want to pay off all debts first or achieve other goals, like buying a house. In some cases, that might be true, like paying off high-interest credit cards or saving for a short-term goal, such as a three to six-month emergency fund.

But once a person has an emergency fund and is out of credit card debt, they should consider investing, even if they have a mortgage or student loan debt. Even if they’re only investing for retirement, it’s a good idea to start as soon as possible.

💡 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.

Consider Investing as Early as Possible

The younger you are when you invest, the better the chances are that you’ll reach your financial goals. For example, imagine Person A invests $200 a month in a retirement account starting at age 25.

Person B invests the same amount starting at age 35. They both continue to add $200 a month to their account. When they both retire at age 65, Person A will have almost twice as much as Person B: $306,689, compared to $167,550, assuming a 6% rate of return, 2% inflation rate, and 15% tax rate.

That’s true even though Person A only contributed 33% more to her account. This is how compound interest grows investments, or the power of how earnings from one’s investments can continue to build wealth.

Percentage of Retail Investors in Stock Market

As mentioned, after the 2008 financial crisis, many people were reluctant to invest in the stock market. But in recent years, that’s changed. Retail investor participation in the U.S. stock market increased considerably in 2020 and 2021, for a variety of reasons.

As of 2023, retail inventors comprise about a quarter of all total trading volume in the stock market. That may change in the future, too, as younger investors – with quicker, easier access to investing tools, in many cases – look at getting into the markets.

The Takeaway

Timing the market is difficult, if not impossible, and involves trying to “time” trading or investing moves to coincide with an increase or decrease in the stock market. Nobody can tell what the future holds, so it’s generally hard to accurately pick the right investments at the right time. That’s not to say that some investors don’t get it right from time to time, but as an overall strategy, it’s likely not advisable.

If an individual is skittish about investing, their anxiety makes sense in light of the dramatic market ups and downs many have witnessed in the past two decades. But trying to time the market doesn’t work. Instead, investing in a diversified portfolio can be a good step toward building individual wealth.

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), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.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. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

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 $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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

SOIN0623021

Source: sofi.com

Apache is functioning normally

October 2, 2023 by Brett Tams

Gross Domestic Product, or GDP, is an economic measure representing the total value of all goods and services that a country or region produces in a specific time period, usually a quarter or a year.

The GDP of the United States was $26.49 trillion at the end of Q1, 2023, an increase of 1.3% over the previous quarter, according to the Department of Commerce’s Bureau of Economic Analysis (BEA).

GDP can serve as a quick, numeric shorthand for explaining a country’s economy’s trajectory, and investors can use it as a factor, along with market trends and other analysis, in making their investing decisions. It’s important for investors to know more than just the definition of GDP in order to have context about what the number truly means.

Calculating GDP

When calculating the GDP of a country, economists look at a wide range of factors, including: Public and private consumption, government spending, investments, growth in private inventories, construction spending, as well as the balance of foreign trade (exports minus imports).

The GDP formula can be complicated, so to enable comparisons, countries typically follow a set of internationally accepted guidelines, known as the 1993 System of National Accounts, created by the International Monetary Fund, the European Commission, the Organization for Economic Cooperation and Development, the United Nations, and the World Bank.

In the United States, the BEA uses data collected by other federal agencies, including the Census Bureau, the Bureau of Labor Statistics, and the Treasury. It also gathers information directly from private industry, including trade groups and companies that specialize in sales data for a wide range of products, from prescription drugs to cars.

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

Multiple Measures of GDP

There are several ways to measure GDP.

Real GDP

Real GDP is an inflation-adjusted measure of the value of the amount of goods and services produced by a given economy. This is the number typically released by the United States.

Nominal GDP

Nominal GDP uses current market prices to compare countries’ GDP. It does not adjust values based on inflation. If a country’s output remains steady, but the value of what they produce changes, then its nominal GDP would change. That makes it much harder to compare GDP in two different time periods.

Purchasing Power Parity GDP

Purchasing Power Parity (PPP) measures GDP as adjusted for the differences in both local prices and local living costs. This metric allows economists to make more meaningful correlations from country to country about the impact of GDP on the people who live there.

Per Capita GDP

This breaks down the GDP by the number of people in a country’s population. As such, it shows the average output or income of each person in that country, and is often used to paint a picture of the relative wealth or poverty in a given country.

Recommended: 101 Investing Guide

What GDP Means for Investors

When the GDP makes the financial news, the number in the headline is usually a percentage, namely how much the GDP rose or fell in the most recent quarter. The standard definition of a recession is two quarters of consecutive declines in the GDP.

During a period of rising GDP, employment tends to increase because companies staff up for expansion. This means that more people have more income to spend. That creates more business, which keeps the growth cycle spinning. But when GDP is in decline, the opposite tends to occur, with fewer people working, and wages depressed, leading to a downward cycle.

While there is not a direct cause-effect relationship between the GDP and stock or bond prices, some investors use a strategy known as business-cycle investing to determine how to allocate their portfolio.

Recommended: Asset Allocation by Age

Equity Investors

Many stock investors prefer an economy where the GDP is steadily rising, since it often means a healthy economy and higher company earnings, which can boost the stock market. In contrast, a falling or stagnant GDP can be bad news for stock prices.

Bond Investors

Fixed-income investors may have a different view of GDP. That’s because GDP growth often comes with more borrowing by both consumers and businesses, which can create inflation. Inflation often leads to higher interest rates, which have the effect of driving down bond prices. With sinking GDP, the opposite tends to happen, resulting in higher bond prices.

The Takeaway

GDP is essentially an economic scorecard for a country. By understanding how a country’s GDP is changing over time, and how it compares to other countries, you can get a sense of its overall economic health. Investors can consider GDP trends when planning their investing strategy.

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), 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.

Photo credit: iStock

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.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. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

Claw Promotion: Customer must fund their Active Invest account with at least $10 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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October 1, 2023 by Brett Tams

Quadruple witching refers to the simultaneous expiration of four popular investment contracts, creating wild market conditions. Given its name, it may just be the spookiest day of the year for investors – sorry, Halloween! Quadruple witching day occurs on the third Friday in March, June, September, and December.

The last hour of those trading days is known as the “quadruple witching hour”, when many derivatives contracts expire, often creating volatility in the markets. That’s because there may be higher market volume on those days as traders either close out or roll over their positions.

What is Quadruple Witching Day?

Quadruple witching, or quad witching, is trader’s terminology for the four dates on the calendar when four kinds of options contracts expire: stock options, stock index futures, index options, and stock futures.

Each of the contracts has expiration dates that will match up each quarter, which is why quadruple witching, or quad witching, happens in the third, sixth, ninth and twelfth month of the year respectively. The expiration for these contracts happen at the same time in the day — the afternoon.

While events like quadruple witching may not impact how and when you invest (especially if you’re investing for the long term), they are a good reminder of the investment risks that any investing strategy or approach brings.

How much attention individual investors pay to witching day may depend on their investing philosophy and their time horizon. Since quad witching can result in short-term volatility, many passive investors may ignore them entirely. On the other hand, active investors who try to time the market and get in and out of trades quickly in the most advantageous manner, may use them to inform their strategy and consider buying or selling witching hour stocks.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Contracts Involved in Quad Witching

To understand quadruple witching, you have to first understand the different options contracts involved. Stock index futures, stock index options, single stock futures and single stock options are all derivatives, meaning their value corresponds to the value or change in value of an underlying asset. The underlying assets are either stock market indexes, like the S&P 500, or individual company stocks.

Options contracts give holders the right, but not the obligation, to buy or sell a stock at a certain price at a future date. Futures contracts are contracts to purchase shares of a given stock at a certain price in the future.

For indices, futures and options are contracts on the value of an equity index. Investors often use these either to hedge or make outright speculations on the moves of an index. All four derivatives are complex investments that involve risks when playing the market, and they’re more often used by professional traders and institutional traders than retail investors.

Recommended: Is it Possible to Time the Stock Market?

How Does Quadruple Witching Affect the Market?

Quadruple witching days are those four days of the year when these types of contracts all expire, those who bought contracts and choose to exercise them will receive their stock or cash, or they make additional transactions to take advantage of arbitrage opportunities.

This can lead to more buying and selling of shares than is typical for a given day or, especially a given hour. Increased volume can mean more volatility in the markets and the possibility of large swings during the day.

One reason these days can cause hiccups in the markets is that while certain positions expire, investors may want to extend them. This means they have to “roll” the bet in order to keep it active, potentially forcing other players in the market to buy or sell, especially if the market is already volatile or choppy.

For trades that involve the transfer or automatic buying of stock, like options trades on individual shares, the quadruple witching date can mean automatic buying up of shares to fulfill the options contracts, leading to spikes even if there is no “fundamental” reason for them.

Overall, volumes in options trades can go up on quadruple witching days, which can sometimes have knock-on effects on the price of the underlying assets involved in options contracts.

The Takeaway

Quadruple witching day occurs on the third Friday in March, June, September, and December. The last hour of those trading days is known as the “quadruple witching hour”, when many derivatives contracts expire, often creating volatility in the markets. That’s because there may be higher market volume on those days as traders either close out or roll over their positions.

Quadruple witching offers an opportunity to understand how market mechanics can affect actual prices, but it may not impact the strategy for most long-term investors. More experienced investors and traders may find profitable opportunities, however, as the markets enter a period of volatility.

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), 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.

Photo credit: iStock/Radachynskyi

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.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. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

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 $10 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

October 1, 2023 by Brett Tams

Leverage ratios are a collection of formulas commonly used to compare how much debt, or leverage, a company has relative to its assets and equity. It shows whether a company is using more equity or more debt to finance its operations. Understanding a company’s debt situation is a key part of fundamental analysis during stock research. Calculating its financial leverage ratio helps potential investors understand a company’s ability to pay off its debt.

A high leverage ratio could indicate that a company has taken on more debt than it can pay off with its current cash flows, potentially making the company a riskier investment.

How to Calculate Leverage

A company increases its leverage by taking on more debt, acquiring an asset through a lease, buying back its own stock using borrowed funds, or by acquiring another company using borrowed funds.

There are several types of leverage ratios, which compare a company’s or an individual’s debt levels to other financial indicators. Some commonly used ones are:

Debt-to-Assets Ratio

This ratio compares a company’s debt to its assets. It is calculated by dividing total debt by total assets. A higher ratio could indicate that the company has purchased the majority of its assets with debt. That could be a warning sign that the company doesn’t have enough cash or profits to pay off these debts.

Formula: Total debt / total assets

Debt-to-Equity Ratio (D/E)

The debt-to-equity ratio compares a company’s debt to its equity. It is calculated by dividing total debt by total equity. If this ratio is high, it could indicate that the company has been financing its growth using debt.

The appropriate D/E ratio will vary by company. Some industries require more capital and some companies may need to take on more debt. Comparing ratios of companies in the same industry can give you a sense of what the typical ranges are.

Formula: Total debt / total equity

Asset-to-Equity Ratio

This is similar to the D/E ratio, but uses assets instead of debt. Assets include debt, so debt is still included in the overall ratio. If this ratio is high, it means the company is funding its operations mostly with assets and debt rather than equity.

Formula: Total assets / total equity

Debt-to-Capital Ratio

Another popular ratio, this one looks at a company’s debt liabilities and its total capital. It includes both short- and long-term debt, as well as shareholder equity. If this ratio is high, this may be a sign that the company is a risky investment.

Formula: Debt-to-capital ratio: Total debt / (total debt + total shareholder equity)

Degree of Financial Leverage

This calculation shows how a company’s operating income or earnings before interest (EBIT) and taxes will impact its earnings per share (EPS). If a company takes on more debt, it may have less stable earnings. This can be a good thing if the debt helps the company earn more money, but if the company goes through a less profitable period it could have a harder time paying off the debt.

Formula: % change in earnings per share / % change in earnings before interest and taxes

Consumer Leverage Ratio

This ratio compares the average American consumer’s debt to their disposable income. If consumers go into more debt, their spending can help fuel the economy, but it can also lead to larger economic problems.

Formula: Total household debt / disposable personal income

💡 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.

Ways to Use Leverage Ratio Calculations

Understanding the definition of leverage ratio and the formulas for various types, is the first step toward using the measurement to make investing decisions. Investors use leverage ratios as a tool to measure the risk of investing in a company.

Simply put, they show how much borrowed money a company is using. Each industry is different, and the amount of debt a company has may differ depending on who its competitors are and other factors, such as its historical profits. In a very competitive industry or one that requires significant capital investment, it may be riskier to invest in or lend to a company with a high leverage ratio.

The interest rates companies are paying matters also, since debt at a lower rate has a smaller impact on the bottom line.

Regardless of industry, If a company can not pay back its debts, it may end up going bankrupt, and the investor could lose their money. On the other hand, if a company is using some leverage to fuel growth, this can be a good sign for investors. This means shareholders can see a greater return on equity when the company profits off of that growth. If a company can’t or chooses not to borrow any money, that could signal that they have tight margins, which may also be a warning sign for investors.

Investors can also use leverage ratios to understand how a potential change in expenses or income might affect the company.

Recommended: How Interest Rates Impact the Stock Market

How Lenders Use Leverage Ratios

In addition to investors, potential lenders calculate leverage ratios to figure out how much they are willing to lend to a company. These calculations are completed in addition to other calculations to provide a comprehensive picture of the company’s financial situation.

Overall, leverage ratio is one calculation amongst many that are used to evaluate a company for potential investment or lending.

Recommended: What EBIT and EBITDA Tell You About a Company

How Leverage is Created

There are several different ways companies or individuals create leverage These include:

• A company may borrow money to fund the acquisition of another business by issuing bonds

• Large companies can take out “cash flow loans” based on their credit status

• A company may purchase assets such as equipment or property using “asset-backed lending”

• A company or private equity firm may do a leveraged buyout

• Individuals take out a mortgage to purchase a house

• Individual investors who trade options, futures, and margins may use leverage to increase their position

• Investors may borrow money against their investment portfolio

The Takeaway

All leverage ratios are a measure of a company’s risk. Understanding basic formulas for fundamental analysis is an important strategy when starting to invest in stocks. Such formulas can help investors weigh the risks of a particular asset investment and compare assets to one another.

There are numerous ways to use leverage ratios, and lenders can use them as well. In all, knowing the basics about them can help broaden your knowledge and understanding of the financial industry.

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), 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.

Photo credit: iStock/MicroStockHub

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.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. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

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 $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN0623017

Source: sofi.com

Apache is functioning normally

September 30, 2023 by Brett Tams

Very few of us can freshen our home design on an endless budget. But you don’t have to feel constrained by your wallet. That’s because not every piece needs to be the highest quality.

We asked Dallas interior designers where they splurge and where they save to help you stretch your home-decorating fund.

Invest in key parts of your bedroom.

No surprises here. We spend a third of our lives sleeping, so your bedroom matters — even though it’s an area guests may not see.

“Your main bedroom is where you should splurge on yourself,” advises Denise McGaha, owner and principal of Denise McGaha Interiors. “A lot of my clients leave that to the last, and I think it’s so important for you to have a really luxurious, amazing night’s sleep. If you don’t sleep well, you’re not fun to be around the next day.”

Your sleeping environment is key, so invest in a great mattress and high-quality linens. You can save on your accent pieces. This bedroom was created by Nikki Watson of The Design Quad.(Courtesy The Design Quad)

McGaha says the mattress is key, but linens are too. So that’s where to concentrate your funds. What about the rest of your bedroom design? Consider buying lower-tier antiques or quality used pieces instead of brand-new furniture.

You can also look for deals on lamps, rugs and throw pillows, creating a designer-approved look that is budget friendly. “Every time you walk in that space,” McGaha says, “I want it to make you smile.”

Chairs trump table in your dining room.

McGaha used an antique table in this dining room. She advises concentrating your budget on striking dining chairs. A statement light fixture is another good investment.(Stephen Karlisch)

What about the star of the show in the dining area: the table? McGaha says don’t spend a lot, even though it’s one of the biggest pieces, size-wise, in your home.

“I want to encourage people to buy vintage or used tables, because the chairs are where it’s at. People are paying attention to the chair and they’re going to see the back of the chair. Do they even see the base of the table? Especially if you love to entertain, you’re going to put a tablecloth over it a lot. So let’s get you a beautiful antique or vintage table, or use your grandmother’s table, and get new chairs.”

When it comes to what’s over the table, that’s another place to go all out. “Lighting is where you want to spend money,” says Nikki Watson, founder of The Design Quad. “Especially with a new build, people will put in basic fixtures. But if they want to update the space and make it look awesome, then lighting makes a big difference.”

How to redecorate your house for free — using items you already own

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Apache is functioning normally

It’s About You

Goals, Timelines, Risk Tolerance

Back to the Students…

Apache is functioning normally

Why is inflation so high?

What happens to inflation when interest rates rise?

How does raising interest rates affect inflation?

Savings Accounts

CDs

Money Market Accounts

When will inflation go down?

Keep saving through the ups and downs of inflation

Optimization, Document Tracking, MSR Financing Products; Saving Money on Credit Reports and CE

In the living room, spend money where people sit.

Limit what you spend in your guest room.

Go for cost-effective pieces in kids’ rooms.

Don’t neglect your entryway.

Why Is Financial Literacy Important for Teens?

5 Key Financial Tips for Teens

1. Opening a Bank Account

2. Budgeting For Teens

3. Smart Savings

4. Being Cautious With Credit

5. Setting Up a Side Hustle

Can You Invest as a Teenager?

Once You Are Old Enough to Invest, Where Do You Start?

Making Smart Money Moves With SoFi as a Teen

FAQ

What should high school students know about financial literacy?

How can a 16-year-old invest money?

How would you invest $1,000 as a teenager?

It’s About *You*

Goals, Timelines, Risk Tolerance

Back to the Students…

What Is a Moving Average?

Types of Moving Averages

Simple Moving Average:

Weighted Moving Average

Exponential Moving Average:

Why Would an Investor Use a Moving Average?

Pros of Using a Moving Average

It smooths the data.

It’s a simple gauge.

Easy to calculate.

Cons of Using a Moving Average

They’re not predictive.

There’s a lag.

There’s trouble with price turbulence.

Weighted moving averages may send false signals.

The Takeaway

Why is inflation so high?

What happens to inflation when interest rates rise?

How does raising interest rates affect inflation?

Savings Accounts

CDs

Money Market Accounts

When will inflation go down?

Keep saving through the ups and downs of inflation

Optimization, Document Tracking, MSR Financing Products; Saving Money on Credit Reports and CE

Option 1: Copy and send this link

Why Timing the Stock Market Doesn’t Work

Fear and Greed in Investing

Why It May Be a Good Idea to Invest Immediately

Consider Investing as Early as Possible

Percentage of Retail Investors in Stock Market

The Takeaway

Calculating GDP

Multiple Measures of GDP

Real GDP

Nominal GDP

Purchasing Power Parity GDP

Per Capita GDP

What GDP Means for Investors

Equity Investors

Bond Investors

The Takeaway

What is Quadruple Witching Day?

Contracts Involved in Quad Witching

How Does Quadruple Witching Affect the Market?

The Takeaway

How to Calculate Leverage

Debt-to-Assets Ratio

Debt-to-Equity Ratio (D/E)

Asset-to-Equity Ratio

Debt-to-Capital Ratio

Degree of Financial Leverage

Consumer Leverage Ratio

Ways to Use Leverage Ratio Calculations

How Lenders Use Leverage Ratios

How Leverage is Created

The Takeaway

Invest in key parts of your bedroom.

Chairs trump table in your dining room.

In the living room, spend money where people sit.

Limit what you spend in your guest room.

Go for cost-effective pieces in kids’ rooms.

Don’t neglect your entryway.

It’s About You