How to Start Investing in Stocks

How to Start Investing in Stocks

You’ve likely heard about the opportunity to earn money by investing in the stock market, but maybe you don’t know where to start.

By educating yourself on how the stock market works, you may be able to take advantage of the potential upside in share prices, while minimizing risk. But it can be easy to get swept up in the sea of information available. The good news? Investing in the stock market is in many ways more accessible given the prevalence of brokerage firms, low trading costs, and mobile investing apps.

Let’s break down some of the most important elements of stock investing, specifically for beginners. Here’s a step-by-step guide for those who want to start stock investing.

1. Learn Stock Market Basics

A stock represents a small percentage of ownership in a public company. Public simply means shares of the company are available for anyone to invest in in the stock market.

There are two types of stocks: common stocks and preferred stocks. Common stocks are what you’re probably thinking of when you consider investing in the stock market. Preferred stocks are considered first in line for dividend payouts, but they don’t come with voting rights, unlike the shareholders of common stocks.

In general, the whole reason for investing is so that the investment earns money in the future. This is also known as a “rate of return.”

With stocks, that rate of return comes in two forms: price appreciation and dividends. Price appreciation is when the price (the value) of a stock increases over time. For example, if a stock’s value increases from $10 to $12, the price appreciated by $2 or 20%. Dividends can be cash payouts made by the company to stockholders—you can think of them as your share of the profits as an owner of the company.

3. Research Different Ways to Invest in Stocks

For those wondering how to start investing in the stock market, it might help to understand that there is more than one method to do so.

One way is by buying individual company stocks. Another is through purchasing funds, either mutual funds or exchange-traded funds (ETFs).

1. Buying Individual Stocks

This method requires a significant amount of research into individual stocks. You want to do a deep dive into the company’s inner workings and compare that with the price of the stock.

Additionally, you might want to get comfortable reading a company’s balance sheet and other financial statements. All public companies are required to file this information with the Securities and Exchange Commission (SEC), so you won’t have trouble finding them.

One of the most basic metrics for understanding a stock’s value as compared to company profits is its price-to-earnings (PE) ratio. Others include the price-to-sales (PS) ratio and the price/earnings-to-growth (PEG) ratio, which may be helpful for companies that have little to no profits but are expanding their businesses quickly.

If there’s a company whose share price is out of an investor’s reach, one possibility is to vest via fractional shares, or slices, if applicable of one whole company stock.

One advantage of owning individual stocks is getting direct exposure to a company an investor believes has the potential to grow revenue and earnings. The downside of course is that the investor needs to make sure themselves that their portfolio is well diversified.

2. Investing in Funds

A second way to start investing in stocks is by using funds, either mutual funds or exchange-traded funds (ETFs). A fund is a basket of individual investments, such as all stocks, bonds or a combination of both.

Two of the main differences between mutual funds and ETFs are fees and when investors can trade. In general, ETF fees tend to be lower than mutual fund fees. Most mutual fund buy-and-sell orders are executed once a day, during the market close at 4 p.m. Meanwhile, ETFs trade like stocks on an exchange so can be bought and sold during the market trading hours of 9:30 a.m. to 4 p.m.

Whether investors pick a mutual fund or ETF, they need to decide whether they want an active or passive (Index) fund. Active funds are typically managed by a human portfolio manager, who picks and chooses which stock they deem to be of best value. However, in the past dozen years or so, passive or index funds have become increasingly popular because of their low-cost structure and the easy diversification they offer.

For example, an S&P 500 index fund invests in all 500 companies that make up the benchmark stock gauge. With the purchase of just this one fund, the investor gains exposure to all these companies.

A benefit to stock funds is that you do not take on the risk of being invested in individual stocks that do not perform well. Additionally, index investing can be an affordable way to get broad exposure to the stock market. Some funds, such as thematic ETFs, may also hold a narrow slice of the market based on a specific niche or theme.

3. Investing Through Robo-Advisors

Another way people can get exposure to the stock market is through robo-advisors, computer algorithms that essentially generate financial planning for individuals. The services robo-advisors offer include building portfolios, rebalancing them, executing trades, and automated tax-loss harvesting.

Robo-advisors aim to make financial and retirement decisions more affordable for consumers. Many consumers have found robo-advisors worth it as they’ve been deterred by the higher costs of human financial planners. Here’s how they typically work: an individual fills out an online questionnaire about their financial goals, risk tolerance and investment horizon.

The robo-advisor will generate a portfolio for them, allocating more to riskier assets like stocks if the individual is investing for the long term, while allocating more to safer assets like bonds if the person is closer to retirement.

2. Set an Investing Budget

How much money should a person invest in the stock market? When it comes to a personal budget, essentials come first: housing and food costs, childcare costs, an emergency fund. Any money left over after important costs can be used as investment funds.

4. How to Invest for the Long-Term

People who put money into the stock market tend to benefit if they invest for a longer period of time. This is true from a tax perspective and due to the stock market’s tendency to experience shorter-term volatility.

Taxes on investment gains are called capital gains taxes, and profits from investment held for less than a year are taxed at a higher rate.

Plus, holding investments for longer may help investors ride out stock market volatility. For instance, after the Covid-19 pandemic triggered a selloff in share prices during March 2020, the market bounced back later in the year.

5. Open a Brokerage Account

Once you’ve made the decision to purchase stocks (or stock funds), it might be a good time to figure out where to do it. One of the easiest options is through a brokerage account.

A brokerage account gives you a platform on which to buy and sell securities (mostly stock, options and bonds) through an exchange or from their own supply. Additional services offered through a brokerage can include advice and management. Typically, full-service brokerages offer more services but at higher overall costs, while discount brokerages give scaled-down services with lower overall costs.

Some brokerage firms charge a commission, called a transaction charge or a trading fee, for securities bought and sold on an exchange including stocks and ETFs. This can make buying and selling individual stocks an expensive affair, especially if you are trying to build a diversified portfolio with many stock holdings. Therefore, ETFs or no-commission brokerages might be a more economical way for new investors.

6. Manage Your Investment Portfolio

As mentioned, it’s often better to invest for the long-term in stocks. While it’s important to monitor the stock market, worrying about the day-to-day price fluctuations isn’t necessary.

However, as a person gets older and closer to retirement, they may want to shift their investments to safer stocks. For instance, a person investing in their 20s may benefit from higher exposure to cyclical stocks, those more closely tied to economic growth, or international stocks, which are generally riskier than domestic blue-chip companies.

Meanwhile, an older person eyeing retirement may want to adjust their portfolio to have a bigger bond weighting.

The Takeaway

Investing in the stock market has been an important way for individuals to build personal wealth. However, stocks are a risky asset class. While long-term they’ve generally climbed higher, the market is also prone to volatility and selloffs. It’s important for beginner investors to start investing by using the step-by-step guide above.

Investors can buy and sell individual stocks, ETFs or fractional shares while paying zero commissions through SoFi Invest®’s Active Investing platform. For those who are interested in investing in stocks through a more hands-off approach, the Automated Investing service builds, manages and rebalances portfolios at no management costs. Plus, certified financial planners can answer questions for no additional fees.

Start investing with your SoFi Invest account today.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. 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 pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIN19088

Read more
businessman with smartphone

Crypto Arbitrage: How It Works & Trading Strategies

Cryptocurrency arbitrage is a strategy in which investors buy a cryptocurrency on one exchange and then quickly sell it on another exchange for a higher price.

Cryptocurrencies like Bitcoin trade on hundreds of different exchanges, and sometimes, the price of a coin or token may differ on one exchange versus another. That’s where the classic Wall Street strategy of “arbitrage” comes in. “Capturing the arb” means taking advantage of the fact that an asset is selling for cheap in one place and at a higher price in another market.

With crypto arbitrage therefore, investors seize upon the opportunity that a digital currency is trading at a lower price on one exchange by buying and selling it almost immediately for a higher price on another exchange. Here’s a closer look at how crypto arbitrage works and trading strategies that use the tactic.

What Types of Arbitrage Exist?

There are some different ways investors can conduct crypto arbitrage. These are a couple of the types.

Spatial Arbitrage

Spatial arbitrage involves trading virtual currencies across two different exchange platforms. Spatial arbitrage is a straightforward way of conducting crypto arbitrage.

While this is a simple tactic that can take advantage of price discrepancies, spatial arbitrage exposes the traders to risks like transfer times and costs.

Spatial Arbitrage Without Transferring

Some traders try to to avoid the risks of transfer costs and times that spatial arbitrage poses. For example, in a hypothetical case, they may go long Bitcoin on one exchange and short on another and wait until the prices on the two exchanges converge.

That allows them to avoid transferring coins and tokens from one platform to another. However, trading fees may still apply.

Triangular Arbitrage

Triangular arbitrage takes advantage of pricing inefficiencies among different pairs of cryptocurrencies on the same exchange. With this strategy, an investor starts with one cryptocurrency and then trades it for another cryptocurrency on that same exchange—one which is undervalued relative to the first crypto.

The investor would then trade that second cryptocurrency for a third cryptocurrency which is relatively overvalued when compared with the first. Finally, the investor would trade that third cryptocurrency for the first crypto, completing the circuit a little richer.

How to Take Advantage of Crypto Arbitrage Algorithmically

At first glance, cryptocurrency arbitrage seems like a simple matter of looking for gaps between the prices on one exchange and another, and then executing a buy and a sell.

Famously, in 2017 there was a moment when the price of Bitcoin on Kraken was $17,212, but only $16,979 on Bitstamp—presenting an arbitrage opportunity. In that instance, an investor could potentially make $233 per Bitcoin by buying them on Bitstamp, and then quickly selling them on Kraken.

While Bitcoin spreads aren’t always as wide as in the above example, there are times when other, less well-known forms of crypto could offer even wider gaps. Since cryptocurrency prices can vary from exchange to exchange, arbitrage opportunities can pop up, with thousands of cryptocurrencies trading on hundreds of exchanges for people investing in cryptocurrency.

There are a number of apps investors can download that will track the prices of Bitcoin and other cryptocurrencies for arbitrage opportunities. This way, investors can take advantage of algorithms that automatically scan for arbitrage across different crypto exchanges. This automated approach can allow crypto-arbitrage traders to take advantage of multiple different price discrepancies.

Recommended: How Do Crypto Trading Bots Work?

How to Find a Crypto Arbitrage

Not every cryptocurrency digital asset is created equal when it comes to arbitrage.

For instance, Bitcoin has become very widely traded. That’s resulted in fewer Bitcoin arbitrage opportunities.

But there are other ways to get involved in crypto arbitrage besides investing in bitcoin.

Method 1: New Software

With so many different cryptocurrencies on so many exchanges, finding those opportunities is a daunting task. That’s why many traders use software applications that track the hundreds of cryptocurrency exchanges in real time.

There are a growing number of companies that specialize in software to automate crypto arbitrage. Some companies have a tool that allows investors to choose an automated arbitrage strategy and execute it across different exchanges.

Method 2: Less Popular Cryptocurrencies

Investors can find bigger price spreads for the same cryptocurrency digital assets among less-popular, less-frequently traded forms of crypto.

Because they’re less popular, though, these cryptocurrencies are prone to rapid price fluctuations. That volatility can be good or bad news, but it adds another level of risk to an arbitrage strategy.

Recommended: Top 30 Cryptocurrencies By Market Cap

Start trading Bitcoin, Ethereum,
and Litecoin today.


What Are the Dangers of Crypto Arbitrage?

Losses

To succeed in crypto arbitrage, investors need to execute the trades quickly in order to take advantage of cryptocurrency price differences from exchange to exchange, while those differences are still profitable.

With the thinly traded forms of crypto that offer the widest spreads, a trader has to be careful not to increase the purchase price and decrease the sale price of a digital asset by their own trades.

Volume

The crypto exchanges all work similarly, pricing crypto based on the last trade on that exchange. But it’s important to note that not all exchanges are created equal. Some of them have enormous trading volumes, while others aren’t as active. The trading volume on each affects the liquidity and the available prices on a given exchange.

Low volume may mean that the exchange can’t execute a trade large enough to deliver the profit an investor is hoping for. Low volume may also mean that the trade is possible but will take too long to seize the pricing opportunity.

Transaction Costs

At the same time, traders need to keep an eye on the transaction fees that come with buying and selling across trading platforms. As the cryptocurrency markets evolve, these fees continue to fluctuate, varying from exchange to exchange.

Fraud, Hacks

Cryptocurrencies are largely unregulated, which is one of the key things to know before investing in cryptocurrency.

Recommended: Cryptocurrency Rules & Regulations

As a result, they come with more risks from hacks, fraud, and outright currency collapse. That’s why securely storing your cryptocurrencies is a hot topic among investors.

Recommended: Cold Wallet vs. Hot Wallet

Taxes

In the US, where cryptocurrency adoption has skyrocketed in recent years, the IRS has created a tax guide which categorizes cryptocurrencies as property. The Securities and Exchange Commission, on the other hand, has called cryptocurrencies a form of security—and the Commodity Futures Trading Commission has called them a form of commodity.

Recommended: Is Crypto a Commodity or a Security?

The IRS treats cryptocurrency gains in the same way as gains made from selling property. With that in mind, investors must account for any capital gains taxes on their Federal income tax return, but may also be able to take deductions based on any losses.

The Takeaway

Arbitrage exists across the capital markets, in stocks, bonds and commodities, wherever the same asset trades for different prices in different places. Since cryptocurrencies are digital and aren’t based on an underlying asset, it is harder to place a value upon and doesn’t have the same pricing conventions as equities and bonds, which are tied to the performance of a company, municipality or nation.

Cryptocurrency is complicated, and arbitrage strategies can be even more complex. But the practice is legal, and has the potential to yield high rewards while also exposing an investor to high risk.

As with any investment strategy, it is important for investors to do their own research when exploring crypto arbitrage, including looking at different, lesser-known cryptocurrencies, and available software to track cryptocurrency exchanges in real time.


On SoFi Invest®, investors can trade their first cryptocurrency with as little as $10. Doing so will get them a bonus of $10 in Bitcoin. Unlike the stock market, investors can also trade cryptocurrencies like Bitcoin, Litecoin and Ethereum 24/7. Plus, SoFi takes security seriously and uses a number of tools to keep investors' crypto holdings secure.
Get started trading crypto on SoFi Invest today.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. 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 pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products 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.

SOIN20206

Read more
Should Students Opt Out of Standardized Testing?

Should Students Opt Out of Standardized Testing?

If there’s a silver lining in the confusing landscape of higher education during the COVID-19 crisis, it may be that the college admissions process has become more seamless. One change that may be here to stay is colleges offering students the choice to opt out of standardized testing, like the SAT® and the ACT®.

This change had already been brewing prior to the COVID-19 crisis, with some selective universities making standardized testing scores optional. One of the most notable was the University of Chicago, which dropped its SAT requirement in 2018.

The COVID-19 pandemic led to many schools dropping requirements for standardized testing, due, in part, to the lack of testing facilities for students. But as the world returns to normal, some colleges will continue to make standardized testing optional for incoming applicants.

Related: ACT vs. SAT

Standardized testing has long been controversial, in part because it may shift favor toward affluent applicants who can afford test preparation courses, or who go to well-funded public schools or private schools that can teach test-taking skills. In this way, critics of standardized testing say that standardized testing doesn’t measure aptitude; it merely measures a student’s ability to take a test.

And while seeing that a school is test optional may make some students breathe a sigh of relief, it can lead to confusion for many applicants, especially those who are strong test-takers. Understanding how colleges may use these scores can help you make the decision as to whether to include them in your application package.

Test Optional Versus Test Blind

To assess how a university will potentially use test scores, it’s helpful to see whether the school is test optional or test blind.

Test Optional

The school doesn’t require standardized test scores, but if they’re submitted, they will be evaluated alongside the application package.

Test Blind

The school does not require standardized testing. If a student submits standardized test scores, they will not be looked at or evaluated by the institution.

The difference in these definitions can be helpful to determine whether or not to submit test scores. If the school you apply to is test blind, then sending your scores will not matter. But if the school is test optional, then some applicants may consider sending their test scores if they performed well.

Standardized Testing Can Give Students Options

Students who aren’t sure of where they want to apply, or who are interested in a wide range of potential options, may consider opting in to standardized testing. Also consider that some private scholarships may use standardized testing as one method of evaluation.

As you consider your high school and college career, it can be helpful to ask the following questions:

• What does my school counselor think about opting out of testing?

• How do I perform on testing? Does testing cause me significant anxiety, or is it something that I can excel in with relatively minimal stress?

• Do I plan to apply for college scholarships?

• Do I know which schools I want to apply to? You may not have the answer yet depending on which stage of the college search you’re in, but perusing a few dream or reach school admission requirements can be helpful to assess whether or not you’ll likely need standardized testing.

Recommended: How Many Colleges Should I Apply To?

Know the Test Calendar

For some students, standardized testing for higher education begins with the PSAT/NMSQT®. Also known as the PSAT 10. This test assesses “readiness for college” and may be used for scholarship eligibility. This test is also the qualifying test for the National Merit Scholarship. While it’s commonly taken in tenth or eleventh grade, some middle-schoolers may also take the PSAT 8/9 both for practice and for high school eligibility.

The PSAT does not count toward college admission and colleges will not see a student’s results. That’s why the PSAT can be a helpful first step in assessing how you perform on a standardized test, pinpoint any areas that may need work, and create a plan for the next steps.

Both the ACT and SAT are offered about seven times a year in the United States. Some students take these standardized tests in the spring of their junior year and then retake them in the fall of their senior year. But the right cadence is dependent on a student’s unique profile. For some students, taking the standardized tests just once is enough. Others like to use the first test as a benchmark, then spend the summer studying or taking a prep course before taking the test a second time.

Keep in mind too, that some colleges that consider standardized test scores will allow students to submit only their highest scores. Other schools will look at all of a student’s scores. Knowing how your potential schools will consider standardized test scores can also help you assess how many times you want to take the test.

Recommended: How to Help Your Child with SAT Practice

What Are Alternatives to Standardized Testing?

Some students worry that their applications may be viewed less competitively if they opt out of standardized testing. But it’s important to remember that for many admissions offices, evaluating applications is an art—not a science. Reading through admission requirements can give you a sense of what the university expects from applicants. Some public institutions may have specific numbers that students need to meet to be guaranteed admission. But for many schools, admission is dependent on multiple factors including:

• Essays

• Range and breadth of high school courses taken

• Teacher recommendations

• Extracurricular activities

• College interview

• Other factors, which may include state residency, alumni parents, extracurricular activities or majors planned to pursue in college

• Standardized tests

In short, standardized tests are generally one small part of an admissions package. Talking with a college counselor can help students maximize all other parts of their application for competitive consideration.

Recommended: Do Your SAT Scores Really Matter for College?

Considering How to Pay for College

In the leadup to developing a competitive application, it can be easy to overlook the question of how to pay for college. It’s never too early to begin researching methods of payment. This may include:

• Support from parents and family members

• A student’s own savings

• Private scholarships

• Federal financial aid including; work-study, scholarships, grants for college, and federal student loans

Private student loans

While private student loans can help students fill the gap in how they plan to pay for college, they’re generally used as a last resort because they lack borrower protections offered by federal student loans. But, when students don’t receive enough federal aid to pay for college, private student loans can be one option worth considering.

Students may also look at the tuition cost as they are building the list of colleges they plan on applying to. In general, in-state public universities may be less expensive than private universities, but some private universities have generous financial aid for people who meet certain requirements. Having an understanding of the potential financial commitment alongside the application and admissions process can help students build a clear perspective on how much college will cost depending on where they get accepted.

The Takeaway

The college admissions process can be intense, and standardized tests are only one part of the puzzle. Taking time, doing research, and asking questions early can help you avoid stress. And considering the future: Where you want to go to school, how you’ll pay for it, and what will make the experience successful for you can help you choose the school that is the right fit for you.

Interested in using private student loans as one tool to help pay for college? Learn more about borrowing a private student loan from SoFi.

Photo credit: iStock/FreshSplash


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.
SOPS0621019

Read more
How to Have a Baby Shower on a Budget

How to Have a Baby Shower on a Budget

It’s an honor to be asked to throw a friend or family member a baby shower. But along with that honor, often comes a hefty price tag. Between the food, flowers, decor, and favors, the cost of these soirees can add up quickly.

Fortunately, you don’t need to spend a fortune to throw a fun and memorable celebration for soon-to-be parents and their loved ones. From scoring a cheap (or free) venue to DIYing the centerpieces, there are a number of ways to cut baby shower costs without looking like you cut any corners.

Tips for Throwing a Great Baby Shower on a Budget

These inexpensive baby shower ideas can help you throw a memorable celebration for a mom-to-be and help her become better financially prepared for a baby.

Coming up with a Baby Shower Budget

Before you begin the planning process, it can help to determine the total you can spend on the event and then create a budget. You may also want to find out if family members from either side are willing to chip in financially or by offering to help make something for the party. When setting up your baby shower budget, you’ll likely want to include: the venue, invitations, decorations, food and drinks, entertainment and/or games, prizes and party favors.

Finding a Free (or Low-Cost) Venue

A baby shower doesn’t have to be at a fancy restaurant, hotel, or banquet hall to be festive. It could take place at your, or someone else’s, home. If you’re hosting a baby shower in warm weather. You might consider having it outdoors, such as in your backyard. You could even host a more casual shower with an outdoor barbeque or even a poolside party.

Other low-cost locales options include: a nearby park, the clubhouse of your (or someone else’s) apartment complex, or the meeting room at someone’s place of business.

Limiting the Baby Shower Guest List

Generally, the more people you invite to the shower, the more money you will spend. To keep costs in check, you may want to consider limiting the invite list to the parent-to-be’s closest family and friends. A smaller group not only cuts down on costs, but can also help to create a more intimate gathering that allows the guest of honor to spend time with each guest. It can be a good idea, however, to run the invite list by the expectant mom to be sure that you don’t exclude any important people.

Going Digital With Invitations

You can save money on baby shower invitations by using a digital service, such as Evite, MyPunchbowl, or Paperless Post. These sites and apps typically allow you to choose from a range of free baby shower invitation templates or, for a small fee, upgrade to a more elaborate design. These sites also make it easy to keep track of responses. And, guests will likely appreciate the ability to RSVP with the click of a button. You may, however, want to send paper invites to older guests, particularly if they don’t use an email address often.

Ditching the Caterer

Feeding guests typically takes up the biggest portion of a baby shower budget. One way to help keep the cost of food down is to forgo the caterer and head to your local warehouse club (like Costco or Sam’s Club). You’ll likely be able to create a delicious spread of appetizers, finger foods, and desserts for a lot less than ordering trays from a catering company or restaurant.

Timing it Right

You can also cut down on food costs by not holding the shower right at lunch or dinner time. That way, guests won’t arrive expecting a full meal, and you’ll be able to serve a lighter menu that includes simple appetizers and snacks. A late-morning party can be particularly wallet-friendly–you might simply offer coffee, juice, fruit, and pastries. Or, you might opt for an afternoon tea and serve sweets and finger sandwiches.

Keeping the Cake Simple

A gourmet bakery cake can look beautiful, but it could easily bust your budget. According to CostHelper , an average bakery cake runs around $3 to $4 a slice. To cut costs without sacrificing on taste, you might consider ordering a cake at your local grocery store’s bakery or the bakery at a wholesale club, then having it personalized (which the store will often do free of charge).

DIYing Centerpieces

Fresh flowers look lovely, but they can get expensive if you order arrangements from a professional florist. Instead, you may want to head to your local farmers market, grocery store, or warehouse club to find flowers at reasonable prices that fit your color scheme, then make your own centerpieces. A simple way to get great results is to use flowers in the same color family (like shades of pink or all white). You can pick up vases at the dollar store, or go with Mason jars, which look trendy and can be used for other purposes after the shower is over.

Printing Decor and Games for Free

Instead of racking up a big bill at the party store, you may want to comb the web for free baby shower printables. You can likely find food signs, games (like baby shower bingo), decorations, and favor tags that you can simply print right from your computer.

Making Edible Favors

Sweets can make great baby shower favors, and you can easily bake them yourself without spending a lot. You may also find that there is a family member who would be delighted to take on this task. Edible favors can be as simple as iced sugar cookies (in your color scheme) or as elaborate as cake pops that look like baby rattles.

Considering a Virtual Baby Shower

If the guest of honor’s family and friends are spread out all over the country, having a virtual baby shower is one way to include everyone that’s important, and also keep costs down. You can set a celebratory mood by choosing a Zoom background that fits the theme of your shower, and also include a link so guests can download the background as well. Friends and family can watch the mom-to-be open gifts that were sent to her ahead of time. You can also organize games throughout the virtual baby shower and create a digital guest book that attendees can sign and share their words of wisdom for the expecting parents.

The Takeaway

You can plan a memorable baby shower even on a limited budget. And, spending less doesn’t mean the event will be any less special.

Some easy ways to trim the cost of having a baby shower include: hosting the shower in your home or backyard, heading to your local warehouse club (for food, flowers, and even the cake), using free printables for decor and games, and giving homemade sweets as favors.

You can also make a baby shower more affordable by setting a budget and saving up enough money to cover it in advance (so you don’t end up relying on credit cards).

Looking for a good place to build your party fund? A SoFi Money® cash management account can be a good option. With SoFi Money’s “vaults” feature, you can separate your savings from your spending while earning competitive interest on all of your money. You can even set up separate vaults for separate savings goals.

Start saving for your next milestone celebration with SoFi Money.

Photo credit: iStock/vejaa


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SOMN0521042

Read more
What Is a Shell Company and Why Do They Exist?

What Is a Shell Company and Why Do They Exist?

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

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

How Are Shell Companies Created?

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

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

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

Why Do Shell Companies Exist?

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

Shell Corporations Provide Tax Benefits

Many shell corporations operate in a legal gray area, where the major corporations and wealthy individuals may use them to dodge taxes.

A great many companies have found ways to move their profits to offshore shell corporations to take advantage of less expensive, or more permissive tax regimes in other countries. American corporations might set up shell companies in countries with inexpensive labor, where they have already begun to outsource some of their operations.

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

This widespread employment of shell corporations to legally avoid taxes became impossible to ignore after the publication of the Panama Papers in 2016. The 11.5 million documents in the leak showed how the wealthy used 214,488 offshore shell companies to avoid taxes in their home countries and resulted in a global scandal. “It’s not that they’re breaking the laws,” said then-President Barack Obama at the time. “It’s that the laws are so poorly designed that they allow people, if they’ve got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by.”

Shell Companies Offer Less Risk and More Opportunity

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

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

Shell Companies Can Be Used as SPACs

While shell companies come up in the news in relation to questionable tax-avoidance schemes or the widespread abuse detailed in the Panama Papers, they’ve hit the headlines again for less-nefarious reasons recently. That has come with the use of shell companies in special purpose acquisition companies, or SPACs.

There are almost 500 shell companies that qualify as SPACs by some estimates. These are companies formed exclusively to raise capital via an initial public offering (IPO), which will then purchase a company already in operation. SPACs are one type of “blank check company.” And while these companies have existed for decades, they’ve grown increasingly popular in recent years.

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

Recommended: What Is An IPO?

Shell Companies and Shady Dealings

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

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

The Takeaway

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

Whether you’re looking to put money into SPAC or into an ETF, get started investing today by opening an account on the SoFi Invest® platform. SoFi Invest offers an active investing solution that allows you to choose stocks and ETFs and other investments. SoFi Invest also offers an automated investing solution that invests your money for you based on your goals and risk.

Photo credit: iStock/akinbostanci


SoFi Invest®
The information provided is not meant to provide investment or financial advice. 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 pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
SOIN0421162

Read more
TLS 1.2 Encrypted
Equal Housing Lender