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When Will Social Security Run Out?

The Social Security program aims to provide retirement and disability benefits to workers and their families.

Workers pay into the system, the government holds onto the money, and the money earns interest. When workers reach eligibility, the government returns money to them. Essentially, this system relies on a steady stream of workers. But can Social Security run out? If so, when would that happen?

There’s been much talk about the possibility of Social Security running out completely and leaving future retirees in the lurch. In reality, it’s very unlikely that the program would run out of money and shut down entirely
But it is possible that the amount of benefits you receive from Social Security after retirement may not meet your expectations. That’s because without changes, the Social Security system is expected to deplete its existing reserves, leaving workers with a potential benefits shortfall. Here’s a closer look at the program and this issue.

How Social Security Works

The American Association for Retired Persons (AARP) describes Social Security as a “pay-as-you-go” system , meaning that the contributions made by workers today are used to pay the benefits of retirees.

When today’s workers retire, they’ll receive benefits based on what the next generation contributes. Any money that’s left over goes into one of two trust funds.

How Income Matters in Social Security

The amount each individual worker contributes to Social Security depends on their income. Employees who work for a traditional employer split the Social Security tax payment with their employer at 6.2% each and self-employed workers are responsible for the entire 12.4%.

The income cap for 2020 is $137,700. As employees contribute to the tax, they earn Social Security “credits”—one for every $1,410 in earnings in 2020 with a max of four per year.

What Is the Age Eligibility for Social Security?

Those employees become eligible for benefits when they reach 40 credits, which equals roughly 10 years, or full retirement age. For Americans born in 1960 or later, that’s 67 years old.

Getting the most out of Social Security benefits becomes a numbers game as workers get close to retirement age, because workers are technically eligible at age 62. But for each month previous to full retirement age that someone starts drawing benefits, they’re reduced by one-half of one percent.

According to the SSA , that means if a worker’s full retirement age is 66 and 8 months and they start drawing Social Security at age 62, they’ll only get around 71.7% of their full benefit.

The benefits stop increasing at age 70, and the AARP reports that workers who are able to wait that long get the most return—full benefit plus delayed retirement credits—but individual decisions should be made on a number of factors, including employment outlook and health.

Recommended: When Can I Retire?

Social Security Trust Funds

After all the contributions have been paid in and benefits paid out, any remaining funds are divided up between two trust funds, where they earn interest in government-guaranteed Treasury bonds.

As of the 2020 annual report from the SSA, assets reserves at the end of 2019 were at around $2.9 trillion, divided up between the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund.

The larger of the two funds, the OASI, pays benefits to retired workers, their surviving spouses and eligible children, and covers administrative and other expenses. It’s the largest fund that takes care of retirees who don’t face special circumstances, and deposits are made daily. It’s been around since 1940.

The smaller DI Trust Fund handles monthly benefit payments to disabled workers and their spouses and children until they’re eligible for full benefits through the OASI.

Even though both funds are a part of the overall federal budget, they’re handled separately and the SSA isn’t allowed to pay out more than what’s in the trust fund.

Risk of Social Security Running Out

Media headlines in recent years have highlighted concerns over a potential Social Security funding shortfall. But it’s important to separate fact from fiction when understanding how Social Security works.

Myth 1: There won’t be any money to pay benefits

As mentioned, the odds of Social Security running out of money completely are low. Remember, Social Security is pay as you go with today’s workers paying in funds that are used to provide retirement benefits for today’s retirees.

When you retire, your benefits would be paid by those still working. So unless the system itself is abolished, Social Security benefits would continue to exist and be funded by workers.

Reality: Social Security surplus funds may be exhausted

While workers pay into Social Security, the program also has a surplus of trust funds that it can use to pay benefits, as described earlier. The program is scheduled to begin using those funds to pay some benefits in 2021, with payroll taxes continuing to pay the majority of benefits to retirees.

While Social Security itself is unlikely to end, the trust funds may eventually be spent down to $0, which presents the possibility of a reduction in future benefits.

Myth: People who aren’t eligible for Social Security can receive it

Another concern about the possibility of Social Security running out stems from the mistaken belief that illegal aliens and undocumented individuals can illegally claim Social Security benefits.

The idea is that those people might unfairly claim benefits they’re not entitled to, putting a burden on the system and reducing benefits for eligible workers.

Reality: Documentation is required to obtain benefits

A Social Security number or Individual Taxpayer Identification Number is required for the Social Security Administration to create a benefits record for a citizen or non-citizen who’s authorized to work in the U.S. Someone who has either could legally obtain benefits through Social Security since they’ve technically paid into the system.

Myth: The current system can’t support an aging population

As life expectancies increase and the birth rate declines, it’s natural to assume that living longer may affect Social Security’s ability to continue paying out benefits. Someone who’s 25 now, for example, may be wondering what year will Social Security run out and how will it time up with my retirement?

Reality: Social Security can adapt

While there’s little the government can do to change the demographic makeup of the population, lawmakers can be proactive in proposing changes to Social Security. That includes measures that can help to preserve benefits for as many workers as possible while minimizing the odds of running out of funding.

Recommended: Top 5 Social Security Myths

What Is the Expected Social Security Shortfall?

According to a 2020 projection from the Social Security Administration (SSA), workers who reach retirement age after 2034 are projected to receive 76% of scheduled benefits.

So if your normal benefit amount would have been $1,500 per month you’d receive $1,140 per month instead.

That’s important to consider as you create a plan for retirement. You may need to adjust your plan for saving and investing to make up for any projected Social Security benefits shortfall.

Recommended: 5 Ways to Achieve Financial Security

Problems With Social Security

Because benefit payouts are tied to the SSA’s reserve balance, it begs a question for many working Americans—what happens when that balance hits zero? The SSA itself acknowledges that benefits will likely only be available in full until 2034. That’s just 14 years away.

Reasons for the depletion of fund reserves are attributed to a number of challenges, including a rise in program costs. Cost-of-living adjustments, or COLA, have been steadily increasing. Life expectancy for Americans has grown longer, while the number of workers hasn’t kept pace with the number of retirees.

How to Avoid Social Security Running Out

Lawmakers, financial experts, and retirement advocates are starting to float ideas for how to save the program. To date, the two ideas that have been floated include raising the Social Security tax or reducing the benefit—two options that are likely to be unpopular with both workers and retirees.

There are many details on how to implement those two ideas. Some business publications say that the deficit could be eliminated with a combination of both that aggregate to 2.84% of payroll—that equals less than 3 cents for each dollar earned, and it would be split by workers and employers.

Another proposed fix, called the Social Security 2100 Act , would make a number of changes to the current system, such as changing the formula for COLA to use a Consumer Price Index for the Elderly (versus its current price index for wage earners).

It would also involve setting the new minimum benefit at 25% above the poverty line. Advocates say the result would be like getting a 2% raise of the average benefit.

History of Early Social Security

The need to secure a financial future for ourselves and our loved ones isn’t new—or uniquely American. Across the pond, the English passed a series of “Poor Laws” around 1600 intended to ensure that the state provided for the welfare of its poorest citizens.

Americans were quick to embrace the idea that the country should take care of its people, but at first it wasn’t society at large. In 1862, for example, a post Civil War-era program offered pensions to disabled Civil War soldiers, and widows and children of the deceased.

Around the late 1800s, some private companies were starting to offer pension plans too. The first company to offer a real pension plan was the Alfred Dolge Company, which made pianos and organs. They took 1% of an employee’s salary and put it into a pension plan, and then added 6% interest per year.

In 1935, President Franklin D. Roosevelt signed into law the Social Security Act. The government then started collecting Social Security taxes two years later. Then on January 31, 1940, the first monthly retirement check of $22.54 was issued to Ida May Fuller in Ludlow, Vermont.

This Isn’t the First Social Security Shortfall

The retirement en masse of America’s Baby Boomers and parallel decline in birth rate is taking the blame for Social Security’s current problems. But this isn’t the first time the fund has been in trouble.

When the program first began phasing in, for example, workers were contributing but no one was retiring yet, so the fund grew a nice little surplus. Congress, seeing those nice big numbers, were generous with increasing benefits every time they had the chance.

When the 1970s rolled around, however, and those workers reached retirement age, that upward momentum came to a screeching halt. On top of that, a flaw in the program’s COLA formula that caused benefits to double-index, or increase at twice the rate of inflation rather than matching it.

It became such a mess that task forces were created, the error got its own name “The Notch Issue,” and instead of making changes to Social Security during even years, because increases and expansions were good for election campaigns, Congress made changes on odd-numbered years.

Social Security Amendments of 1983

Amendments in 1983 addressed the financing problems to the Social Security system. These changes were the last major ones to the program and were based on recommendations from a commission chaired by Alan Greenspan.

The Greenspan Commission adjusted benefits and taxes. The resulting reforms have generated surpluses and the buildup of a trust fund. However, many experts project that the retirement of the baby boomers, along with other demographic factors, will exhaust the trust.

What Can I Do About Social Security?

The SSA allows contributors to keep track of their Social Security accounts online, work with retirement and benefits estimation tools, and even apply for retirement benefits online.

Perhaps the two most important tools in the journey toward retirement are education and planning—knowing where you are, where you want to be, and what you need. Understanding the ins and outs of the ideal retirement age, whether that’s through Social Security or private retirement savings plans, and how to avoid penalties can help form a solid plan.

Aside from government benefits, one of the easiest steps for traditionally employed workers is to take full advantage of their employer’s 401(k) matching plans. These are programs in which the employer can match what you contribute to the 401(k).

If your employer doesn’t offer a 401(k) or matching plan, consider an IRA or Roth IRA. Regular IRAs are tax-deductible like 401(k)s, meaning you’re not taxed until your withdrawal in retirement. Meanwhile, contributions to Roth IRAs are not tax-deductible, but you can withdraw tax-free in retirement.

The Takeaway

Without fixes, the cash reserves of the SSA will become depleted and workers who reach full retirement age after 2034 will not receive their full benefits.

It can be a scary proposition for some, but knowing that the deadline is approaching is a huge advantage in that members of the workforce who have time to take measures to counter the expected shortfall.

You can help grow your retirement savings by opening a traditional or Roth IRA with SoFi Invest®. Active IRAs provide access to a range of portfolios. With automated IRAs, SoFi will manage a mix of stocks and bonds for individuals. Not sure where to start? Members get access to Certified Financial Planners, who can give advice and guidance on financial decisions.

Open an IRA with SoFi Invest today.


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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.
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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.
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.
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financial chart recession bar graph

What is a Recession?

Just the very word “recession” itself can be unsettling, conjuring memories of the economic hardships during the Great Recession of 2007–2009 and maybe even sparking fears of personal financial troubles.

Recessions tend to have a wide-ranging economic impact, affecting businesses, jobs, everyday individuals, and investment returns. But what are recessions exactly and what kind of long-term repercussions do they tend to have on personal financial situations?

Here’s a deeper dive into these economic events and how to best prepare for recessions.

Definition of Recession

Generally speaking, a recession is a period of economic contraction. Recessions are typically accompanied by falling stock markets, a rise in unemployment, a drop in income and consumer spending, and increased business failures.

Usually, a recession is declared when U.S. gross domestic product (GDP)—which represents the total value of goods and services produced in the country—drops for at least two quarters in a row.

But this is not an official definition of recession, according to the National Bureau of Economic Research (NBER) . Instead, the NBER choose to define recession in terms of monthly indicators, including:

•  Employment. Job growth or job loss can be used to gauge the likelihood of a recession and serve as a litmus test of sorts for which way the economy is moving.
•  Personal income. Personal income can play a direct role in influencing recessionary environments. When consumers have more personal income to spend, that can fuel a growing economy but when personal income declines or purchasing power declines because of rising interest rates, that can be a recession indicator.
•  Industrial production. Manufacturing is a measure of supply and demand, both of which are central in promoting a healthy economy. If manufacturing begins to slow down that could suggest slumping demand and in turn, a shrinking economy.

These indicators aren then viewed against the backdrop of quarterly gross domestic product growth to determine if, in fact, a recession is in progress. For that reason, the NBER doesn’t follow the commonly accepted rule of two consecutive quarters of negative GDP growth, as that alone isn’t considered a reliable indicator of recessionary movements in the economy.

Recommended: Investing With the Business Cycle

History of Defining Recessions

The concept of using two negative quarters of GDP growth can be traced back to a definition of recession that first originated in the 1970s with Julius Shiskin, once commissioner of the Bureau of Labor Statistics. Shiskin defined recession as meaning:

•  Two consecutive quarters of negative gross national product (GNP) growth
•  1.5% decline in real GNP
•  1.5% decline in non-farm payroll employment
•  Unemployment reaching 6%
•  Six-months or more of job losses in more than 75% of industries
•  Six-months or more of decline in manufacturing

It’s important to note that Shiskin’s recession definition used GNP whereas modern definitions of recession use GDP instead. GNP or gross national product measures the value of goods and services produced by a country both domestically and internationally. Gross domestic product only measures the value of goods and services produced within the country itself.

How Often Do Recessions Occur?

While economic recessions aren’t common, they are a normal part of the business cycle. According to the NBER, the U.S. experienced 33 recessions prior to the coronavirus pandemic. The first recession occurred in 1857, and the last was the Great Recession in 2007, which lasted through June 2009. A recession occurs on average every 4.5 years, though the actual timing can and has varied.

For example, the most recent recession occurred nearly a decade on from the Great Recession. On June 8, 2020, the NBER determined that economic activity in the U.S. peaked in February 2020 and that the economy had entered a recession that same month. According to the data, the economic peak occurred in the fourth quarter of 2019 just before the pandemic began.

Recommended: U.S. Recession History

How Long Do Recessions Last?

According to the NBER, the shortest recession took place in the 1980s and only lasted six months while the longest went from 1873 to 1879, lasting 65 months. However, clocking in at 18 months, the Great Recession has been the longest recession since World War II.

If you consider the other 11 recessions since 1945, they have lasted on average about 10 months. Even if the Great Recession is included in calculating the average, it’s extended less than a month.

Statistically, periods of expansion tend to last longer than periods of recession. From 1945 to 2019, the average expansion lasted 65 months while the average recession lasted 11 months.

Between the 1850s and World War II, expansions lasted 26 months on average while recessions lasted 21 months on average. The most recent expansion, i.e. the one that occurred between 2009 and the beginning of 2020, lasted 128 months.

In terms of severity, the Great Recession that occurred between 2007 and 2009 was the most severe economic drawdown since the Great Depression of the 1930s. This recession was considered particularly damaging due to its duration, unemployment levels that peaked around 10% and the widespread impact on the housing market.

Recommended: A Brief History of the Stock Market

Common Causes of Recessions

No two recessions are exactly the same, and that goes for what causes them. But generally speaking, recessions happen when something causes a loss of confidence among businesses and consumers. The recession that occurred in 2020 could be considered an outlier, as it was sparked largely by an external global event, rather than internal economic causes.

The mechanics behind a typical recession work something like this. As consumers lose confidence, they stop spending, driving down demand for goods and services. As a result, the economy shifts from growth to contraction. This can, in turn, lead to job losses, a slowdown in borrowing and a continued decline in consumer spending.

Here are some common characteristics of recessions:

High Interest Rates

High interest rates make borrowing money more expensive, and therefore limit the amount of money available to spend and invest. In the past, the Federal Reserve has raised interest rates to protect the value of the dollar or prevent the economy from overheating, which has at times resulted in recession.

For example, the 1970s saw a period of stagnant growth and inflation that came to be known as “stagflation.” In an attempt to fight it, the Fed raised interest rates throughout the decade, which created the recession of 1980–1982.

Falling Housing Prices

If demand for housing falls, so too does the value of people’s homes. Homeowners may no longer be able to tap the equity in the houses through vehicles such as second mortgages. As a result homeowners may have less money in their pockets to spend.

Stock Market Crash

A stock market crash occurs when a stock market index drops severely. If it falls by at least 20%, it enters what is known as a “bear market.” Stock market crashes can result in a recession, since the net worth of individual holdings also decline. It can also cut into confidence among people, causing them to spend and hire less.

As stock prices drop, businesses may also face less access to capital and may produce less. They may have to layoff workers, whose ability to spend is curtailed. As this pattern continues, the economy may contract into recession.

Reduction in Real Wages

Real wages describe how much income an individual makes when adjusted for inflation. In other words, it represents how far consumer income can go in terms of the goods and services it can purchase.

When real wages shrink, a recession can begin. Consumers can lose confidence when they realize their income isn’t keeping up with inflation, which can lead to less spending and economic slowdown.

Bursting Bubbles

Asset bubbles are to blame for some of the biggest recessions in U.S. history, including the stock market bubble in the 1920s, the tech bubble in the 1990s, and the housing bubble in the 2000s.

An asset bubble occurs when the price of an asset such as stock, bonds, commodities and real estate, quickly rises without actual value in the asset to justify the rise.

As prices rise, new investors jump in hoping to take advantage of the rapidly growing market. Yet, when the bubble bursts—for example, if demand runs out—the market can collapse, eventually leading to recession.

Deflation

Deflation is a drop in prices, which can be caused by oversupply of goods and services. This oversupply can result in consumers and businesses saving money rather than spending it. As demand falls and people spend less, recession can follow.

What are the Impacts of Recession?

When the economy begins to slow down, businesses may have fewer customers because consumers have less real income to spend. So they institute layoffs as a cost-cutting measure, which means unemployment rates rise.

As more people lose their jobs, they have less to spend on discretionary items, which means less sales and revenue for businesses. Individuals who are able to keep their jobs may choose to save their money rather than spending it, which again, leads to less revenue for business.

Investors may see the value of their portfolios shrink if a recession triggers stock market volatility. Homeowners may also see a decline in their home’s equity if home values drop because of a recession.

When consumer spending declines, corporate earnings start to shrink. If a business doesn’t have enough resources to weather the storm, it may have to file for bankruptcy.

Bear Market vs. Recession

Alongside a recession, the stock market often enters a bear market. For example, in response to the coronavirus outbreak in 2020, equity markets plunged, ending an 11-year bull market.

A bear market begins when the stock market drops 20% from its recent high. If you look at the benchmark S&P 500 index, there have been 12 bear markets since 1945. Yet, not all bear markets result in recession. During 1987’s infamous Black Monday, the S&P 500 lost 22% and the resulting bear market lasted four months. However, the economy did not dissolve into recession.

That’s happened three other times since 1947. Bear markets have lasted 14 months on average since World War II, and the biggest decline since then was the bear market of 2007–2009.

The first thing to understand is that the stock market is not the same thing as the economy, though they are related. Investors do react to changes in the economy, because what’s happening in the economy at large can have an effect on the companies in which investors own stock.

So, if investors think the economy is growing, they may be more willing to put money in the stock market. If they think it is contracting, they are likely to pull money out of the stock market. These reactions can function as a sort of prediction of recession.

Recession vs. Depression

A depression is a severe and prolonged downturn. While recessions are a normal part of the business cycle, depressions are outliers that can last for years. Consider that the Great Recession lasted for 18 months, while the Great Depression lasted for 10 years, beginning in 1929.

While there have been 34 recessions, the Great Depression is our only example of a depression. During that decade, as many as a quarter of American were unemployed and GDP was cut in half.

What Caused the Great Depression

What caused the Great Depression? In the months before the depression, the stock market doubled in value amid speculative investing. On October 29,1929, also known as Black Tuesday, that bubble burst.

Throughout the depression, actions by the federal government seem to have exacerbated the problem. First, in 1928 and continuing through 1929, the Fed tightened its monetary policy, raising interest rates. Second, at the time, the U.S. backed its currency with the gold standard.

In 1931, gold speculation in the U.S. sparked a panic in the U.S. banking system after speculators started trading dollars for gold. In 1932, the Fed refused to reduce interest rates to increase the national supply of money, despite the fact that ongoing deflation meant borrowing was very expensive.

Finally, the Fed neglected to address ongoing problems in the banking sector. As a result runs on banks continued, banks closed in droves and Americans turned to hoarding cash.

What is a Stimulus Plan?

Governments and central banks will often do what they can to head off recession through monetary or fiscal stimulus in an effort to boost employment and spending.

Central banks, like the Federal Reserve, can provide monetary policy stimulus. The Fedcan lower interest rates, which reduces the cost of borrowing. As more people borrow, there’s more money in circulation and more incentive to spend and invest.

Fiscal stimulus can come in the form of tax breaks or incentives that increase outputs and incomes in the short term. Governments may put together stimulus packages in an effort to boost economic growth.

For example, stock market volatility increased wildly amid fears of the coronavirus pandemic and its economic fallout. In an effort to ward off recession, the U.S. government put together trillions in Covid-19 stimulus packages that included direct payments to citizens, suspended student loan payments, a boost to unemployment benefits and a lending program for businesses and state and local governments.

How to Invest During Recession

Recessions can be worrying to say the least. And watching stock prices fall can lead investors to panic and pull their money out of the market. However, this behavior can be counterproductive and possibly derail investors’ financial plans.

Stocks are an important part of a long-term investment plan, which means staying invested when markets are down. If investors can hang on to their stocks for the long run, they have a good chance of yielding a return. Selling when stocks are down ensures that investors lock in their losses and means they will miss out on gains when markets rebound.

The Takeaway

Investment plans are usually created with an eye toward meeting long-term goals. The resulting portfolio likely holds a balanced mix of assets that accounts for an investor’s time horizon and risk tolerance.

The inevitability of market downturns and recessions is already built into this type of portfolio. Panic selling can threaten to throw off these carefully laid plans. It is possible during down markets that portfolios will need to be rebalanced. For example, an investor is often recommended to have an asset allocation in their portfolio that consists of 70% stocks and 30% bonds.

The key to riding out a recession is for investors to stick to their long-term plans, only rebalancing when it will help them reach their long-term goals. Investors who have questions about their portfolio during an economic downturn may find comfort in getting advice from a professional. At SoFi, members have access to Certified Financial Planners, who can provide personalized insights for investors.

Download the SoFi Invest mobile app today.


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.
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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 . The umbrella term “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.

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What is The Synthetix Network?

What is The Synthetix Network?

According to the Synthetix white paper, Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. What this means is that the Synthetix network allows people to create synthetic assets, or “synths”.

Synthetic assets are the decentralized finance (DeFi) equivalent of derivatives in traditional finance. Synths take the form of ERC-20 smart contracts that track the returns of a real asset without requiring investors to own that asset. In effect, it can be said that an investor can gain “synthetic” exposure to regular assets in this fashion.

How Do Synths Work?

A synth is a virtual representation of another asset in the form of an ERC-20 smart contract. The smart contract serves to tie the price of the synth to the asset.

Synths can be traded on Kwenta, Synthetix’s decentralized exchange (DEX), and can represent cryptocurrencies, indexes, gold, and more.

Synths utilize decentralized “oracles”, which are price discovery protocols based on smart contracts. These oracles automatically track the price of the asset that a synth represents, allowing investors to hold a synth as if it were actually the underlying asset.

In this way, synths can give crypto investors exposure to assets they wouldn’t normally be able to access through the cryptocurrency ecosystem, such as gold and silver.

Synths are issued on Ethereum, which means users can deposit them on other decentralized finance platforms and earn interest. Some participants in this newly emerging financial system believe that synthetic assets and derivatives are important for the space to mature and become legitimized, as synths and derivatives can help hedge against volatility and facilitate price discovery.

Recommended: What is Ethereum and How Does it Work?

Synths vs Tokenized Commodities

Synths differ from tokenized commodities like Pax Gold (PAXG), created by Paxos, a cryptocurrency backed by physical gold bars. Holding PAXG is intended to give investors a piece of an actual gold bar—someone who holds PAXG has a claim on physical gold that Paxos is holding.

Synths, by contrast, only provide exposure to the price of the underlying asset. For example, a synth for gold would give investors a token they could hold that would mimic the price of gold.

How Does Synthetix Exchange Work?

Users can trade synths on Kwenta, the decentralized exchange (DEX) for Synthetix, as well as across a variety of different DeFi protocols. Unlike other exchanges, Kwenta has no order book that contains buy and sell orders. Instead, Kwenta uses peer-to-contract trading, meaning all trades get executed via smart contracts.

Proponents of Synthetix claim this type of exchange has a few key advantages.

Infinite liquidity: Traders don’t have to worry about “slippage,” or driving prices down when they place large sell orders, reducing their overall profits.
Censorship resistance: Since the system is decentralized and governed by smart contracts, it is free and open to everyone (and resistant to censorship). In fact, users don’t even have to create an account to start using Kwenta.

Oracles from another DeFi protocol called Chainlink (LINK) provide the price feeds that set exchange rates for each synthetic asset. This differs from traditional exchanges, where prices are determined by the point at which buyers and sellers are willing to meet. Trades come with fees of between 0.3% and 1%, and the proceeds get sent to a pool where SNX stakers claim them as rewards for staking tokens.

Is Synthetix a Good Investment?

As with all altcoins, trading SNX can be highly volatile and is widely considered to be a speculative investment.

There are thousands of altcoins, and over the years many of them have seen their values fall to zero or very close to it. These coins tend to make a few people large profits during the speculative mania phase, and then bring large losses to everyone else afterward.

Some investors might believe that certain cryptocurrency projects like Synthetix have the potential to grow into something large and significant in the future (although altcoins in general have failed to do so yet). It’s possible that DeFi protocols like Synthetix could wind up becoming part of a new financial system, in which case the SNX token might perform well.

It’s also possible that decentralized finance as a whole could fail for a variety of potential reasons, in which case SNX and other tokens like it would all go to zero.

Recommended: 2021 Guide to Crypto Trading

How Do You Make Money on Synthetix?

There are a few ways to potentially profit from Synthetix.

Buy SNX, the Synthetix network token, on an exchange. If the price rises, then a profit will be realized.

Trade synthetic assets on Kwenta. If a trader holds synthetic gold or Bitcoin, for example, and the price of those assets rise, then the price of the synths should also rise.

Users can stake their SNX tokens and earn passive income rewards on a regular basis.

How Do You Trade On Synthetix?

There are two ways to start trading synths.

A user can purchase ETH on an exchange before exchanging that ETH for sUSD on Kwenta. The sUSD can then be exchanged for other synths.

A user can obtain SNX tokens on an exchange, then stake their SNX on a decentralized application created by Synthetix called Mintr. At this point, users can create synths and start trading them on Kwenta.

As of March 2021, Kwenta users have the option to trade 13 different cryptocurrencies and their inverse counterparts (inverse cryptocurrencies inversely track the price of cryptocurrencies, providing a way to short them), synthetic gold and silver, and several synthetic government-issued fiat currencies. The Synthetix website lists five categories of synths, including commodities, fiat currencies, cryptocurrencies, inverse cryptocurrencies, and cryptocurrency indexes.

There are also two synthetic cryptocurrency indexes offered by Synthetix: sDEFI, an index that tracks a basket of DeFi assets, and sCEX, which tracks a basket of exchange tokens (e.g., Binance coin).

The Takeaway

Synthetix enables cryptocurrency users to invest in certain assets via proxy mechanisms called synthetics or “synths” for short. Powered by the Synthetix network token (SNX), users can create their own synths and trade them on a decentralized exchange. To create synths, users must stake a certain amount of SNX to collateralize the new synthetic assets.

For some crypto investors, Synthetix might be a step too deep into cryptocurrency waters. Looking for a more straightforward way to invest in crypto? With SoFi Invest® crypto trading, members can buy coins like Bitcoin, Ethereum, and Litecoin, starting with just $10, right from the SoFi app.

Find out how to invest in cryptocurrency with SoFi Invest.


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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands 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.
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Using Collateral on a Personal Loan

There are a lot of reasons someone might need an injection of cash and seek out a loan from a bank: For emergencies, home repairs, to pay off credit card debt with a lower interest rate loan.

One consideration when taking out a personal loan is whether it is secured or unsecured. A secured loan is backed by an asset, called collateral, such as a home or car. An unsecured loan, on the other hand, is not collateralized, which means that no underlying asset is necessary to qualify for financing.

Whether to pursue a secured or unsecured loan will depend on a number of factors, such as your credit score, whether you have collateral, the type of financing you need, and when you need it. These personal loan requirements will be covered in full below, as well as discussing what can be used for a personal loan with collateral and financing options that don’t require collateral.

Of course, not all loans are created equal. If you’re planning to take out a loan, it’s important to do your research and find a loan that best fits your needs and financial situation. Learn more about when someone may borrow a personal loan with collateral.

Why Secured Loans Require Collateral

If collateral is used, a lender may be able to offer larger loans, more favorable interest rates, and better terms. That’s because the lender can take possession of the collateral if the loan isn’t repaid as agreed. This is not the case with an unsecured loan.

Because of the lack of collateral, unsecured loans are often limited to borrowers who are viewed as trustworthy. For example, higher credit scores are usually necessary for an unsecured loan.

Unsecured loans usually have higher interest rates, although this is changing somewhat as online-only lenders such as SoFi aim to offer competitive rates for unsecured personal loans. Unsecured loans can be easier to qualify for, simply because there are fewer hoops to jump through.

Digging up all the paperwork for the asset you’ll use as collateral can take quite a while, and then a bank needs to verify it all. When you’re not tying your loan to collateral, the approval process may be a bit smoother.

Fixed Rate vs Variable Rate Loans

Before diving into the details of collateral, it’s helpful to understand some additional loan terminology. One important distinction is whether a loan has a fixed or a variable interest rate. A fixed rate is just as it sounds; The personal loan interest rate stays fixed throughout the duration of the loan’s payback period, which means that each payment will be the same.

A variable-rate loan, on the other hand, is pegged to a floating rate that is typically associated with a benchmark such as the Fed or LIBOR. Usually, variable rates start lower than fixed rates because they come with the long-term risk that rates could increase over time.

Installment Loans vs Revolving Credit

An installment loan is issued for a specific amount to be repaid in equal periodic installments over the duration of the loan. These are generally good for borrowers who need a one-time disbursement.

For example, borrowers looking for a credit card consolidation loan or a mortgage to buy a home will need an installment loan. An installment loan can be both secured and unsecured. With a mortgage, typically the loan uses your house as collateral.

With a line of credit (also called revolving credit), a borrower can spend up to a designated amount on an as-needed basis. For example, if you have a $10,000 line of credit, you can spend up to that limit using what is similar to a credit card.

Related: How to Pay Tax on Personal Loans

Lines of credit are generally recommended for recurring expenses, such as medical bills or home improvements, and also come in secured and unsecured varieties. If you took out a home equity line of credit, it would often be secured (again, using your house as collateral).

What Can Be Used as Collateral on Personal Loans?

Lenders may accept a variety of assets as collateral on a personal loan. Some examples include:

House or other real estate

For many people, their largest source of equity is the home they live in. Even if you don’t own your home outright, it is possible to use your partial equity to obtain a collateralized loan.

If you use a home as collateral on a personal loan, the lender can seize the home if the loan is not repaid. Furthermore, it might take a while to get approved for the personal loan, because the bank has to verify your asset, which means you have to supply plenty of home-related paperwork.

Bank or investment accounts

In some instances, obtain a personal loan with collateral by using investment accounts, CDs, or cash accounts as collateral. Every lender will have different collateral requirements for their loans. Using your personal bank account as collateral can be risky, because it ties the money you use every day directly to your loan.

Vehicle

A vehicle is typically used as collateral for an auto title loan, though some lenders may consider using it as backing for other types of secured personal loans. A loan backed by a vehicle may be a better option than opting for other short-term loans, such as payday loans, but you run the risk of losing your vehicle if you can’t make your monthly loan payments.

Pros and Cons of Using Collateral on a Personal Loans

Using collateral to secure a personal loan can have pros and cons. While it can make it easier to gain approval from the lender, it’s important to review the loan terms in full before making a borrowing decision. Here are some more pros and cons of using collateral to back a personal loan.

Pros of Using Collateral

•   Using collateral can improve a borrower’s chances of being approved for a personal loan.
•   Borrowers may be able get approved for a larger sum, thanks to the collateral mitigating some of the lender’s risk.
•   Borrowers may be able to secure a lower interest rate with a secured loan than they would with an unsecured loan.

Cons of Using Collateral

•   If the borrower defaults on the loan, the asset being used as collateral could be seized by the lender.
•   In some situations, the lender could go even further to try and get the money owed by the borrower, sending the debt to a collection agency. As with any loan, missing payments could impact the borrower’s credit score.
•   Some lenders may have restrictions for how borrowers can use the money from a secured personal loan.

Qualifying for a Personal Loan

With a secured loan, a lender will likely require proof that you own the asset you are using as collateral. This is a simpler process if you are using bank accounts as backing for your loan, because bank statements are easier to obtain and verify.

When you use your home as collateral, it’s usually a more involved process because they require additional paperwork and an updated appraisal to determine the equity value of your home.

If you need a loan quickly, or don’t own a home or car (or don’t want to put either up as collateral), there are still options. Acquiring an unsecured personal loan can be a fast and simple process compared to obtaining a secured loan, and you aren’t putting your home or car at risk.

With both secured and unsecured loans, you will have to provide the lender with information on your financial standing, including your income, bank statements, and credit score. With most loans, the better your financial standing, the better the rates and terms you’ll qualify for.

If you’re considering taking out a loan—any kind of loan—in the near future, it can be helpful to work on improving your credit score while making sure that your credit history is free from any errors.

Shop around for loans, checking out the offerings at multiple banks, credit unions, and online lenders. Each lender will offer different loan products that have different requirements and terms.

With each prospective loan and lender, make sure you understand all of the terms; This includes (but is not limited to) the interest rate, whether the rate is fixed or variable, and all additional fees (sometimes called “points”).

Ask if there are any prepayment fees that would prevent you from paying back your loan faster than on the established timeline.

The loan that’s right for you will depend on how quickly you need the loan, what it’s for, and your desired payback terms. If you opt for an unsecured loan, it might allow you to expedite this process—and you have the added benefit of not putting your personal assets on the line.

The Takeaway

Using collateral to secure a personal loan can help borrowers qualify for a lower interest rate, a larger sum of money, or a longer borrowing term. However, if there are any issues with repayment, the asset used as collateral can be seized by the lender.

The right choice will vary depending on the borrower’s financial situation, including factors like the borrower’s credit score and history, how much they are interested in borrowing, and what item they have available to be used as collateral.

Looking for a personal loan that doesn’t require collateral? Check out SoFi personal loans, which have competitive rates and no fees.



SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

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.

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What Is an IPO?

An IPO, or initial public offering, refers to the process of privately-owned companies selling shares of the business to the general public for the first time.

“Going public” has benefits: it can boost a company’s profile, bring prestige to the management team, and raise cash that can be used for expanding the business.

But there are downsides to going public as well. The IPO process can be costly and time-consuming and subject the business to a high level of scrutiny.

Meanwhile, for folks who are considering investing in a company’s IPO, there are pros and cons. Here’s a deep dive into IPOs.

How IPOs Work

An initial public offering (IPO) refers to the first time a company offers shares of stock to the general public. A company is not legally allowed to sell stock to the public until the transaction has been registered with the Securities and Exchange Commission (SEC).

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

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

Behind the scenes, companies typically hire investment bankers and lawyers to help them with the IPO process. The investment bankers act as underwriters, or buyers of the shares from the company before transferring them to the public market. The underwriters at the investment bank help the company determine the offering price, the number of shares that will be offered, and other relevant details.

The company will also apply to list their stock on one of the different stock exchanges, like the New York Stock Exchange or Nasdaq Stock Exchange.

History of IPOs

While there are some indications that shares of businesses were traded during the Roman Republic, the first modern IPO is widely considered to have been offered by the Dutch East India Company in the early 1600s. In general, the Dutch are credited with inventing the stock exchange, with shares of the Dutch East India Company being the sole company trading in Amsterdam for many years.

In the U.S., Bank of North America conducted the first American IPO, which likely took place in 1783. A report claims investors hiding cash in carriages evaded British soldiers to buy shares of the first American IPO.

Henry Goldman led investment bank Goldman Sachs’ first IPO–United Cigar Manufacturers Co.– in 1906, pioneering a new way of valuing companies. A challenge for retail companies at the time was that they lacked hard assets, as other big businesses like railroads had at the time. Goldman pushed to value companies based on their income or earnings, which remains a key part of IPO valuations today.

Recommended: A Brief History of the Stock Market

Why Does A Company IPO?

Answering the question, “what’s an IPO?” doesn’t explain why a company “goes public”—an important detail in the process. Because an IPO requires a significant amount of time and resources, a business probably has good reason to go through the trouble.

Raising Money

A common reason is to raise capital (money) for possible expansion. Prior to an IPO, a private company may procure funding through angel investors, venture capitalists, private investors, and so on.

A company may reach a size where it is no longer able to procure enough capital from these sources to fund further expansion. Offering sales of stock to the public may allow a company to access this rapid influx of investment capital.

Exit Opportunity

An IPO may be a way for early stakeholders, such as angel investors and venture-capital firms, to cash out of their holdings. Venture-capital firms in particular have their own investors that need to provide returns for. IPOs are a way for them to transfer their share of a private company by selling their equity to public investors.

More Liquidity

Venture-capital firms and angel investors aren’t the only ones who may be seeking more liquidity for stakes in companies. Liquidity refers to the ease with which an investor can sell an asset. Stocks tend to be much more liquid assets than private-company stakes.

Hence, employees with equity options can also use IPOs as a way to gain more liquidity for their holdings, although they are usually subject to lock-up periods.

Publicity

From the roadshow that investment banks hold to inform potential investors about the company to when executives may ring the opening bell at a stock exchange, an IPO can bring out greater publicity for a company.

Being listed as a public company also exposes a business to a wider variety of investors, allowing the business to obtain more name recognition.

Pros and Cons of an IPO

As with any business decision, there are downsides and risks to going public that should be considered in conjunction with the potential benefits. Here’s a look at a few:

Pros

1. A company’s public offering may provide an opportunity to raise capital on a scale that might not be possible with other forms of capital generation. This is capital that can be used for business expansion, infrastructure buildout, intensive research, or other activities that require a large amount of upfront cash.

2. An IPO may expand opportunities for future access to capital. They can issue more stock and may also be able to attract business partners, potential investors, or other opportunities.

3. An IPO may increase liquidity for a company’s stock, which could allow owners and employees to exercise options and sell shares more easily.

4. Having publicly-traded stocks can be useful in mergers and acquisitions. A company may be able to acquire other businesses by using their stock as payment.

5. An IPO can create publicity and brand awareness for a company. Also, there’s no denying that an IPO provides some prestige for a business.

Cons

1. Going public is expensive and time-consuming. Every company should consider conducting an extensive cost-benefit analysis prior to pursuing an IPO.

2. A public company’s initial disclosure obligations may begin with the registration statement they file with the SEC, but that is far from the only filing requirement. Public companies must continue to keep their shareholders informed on a regular basis by filing periodic reports and other materials.

A public company takes on significant new obligations, such as filing quarterly and annual financial reports with the SEC, keeping shareholders and the market informed, and running extensive internal controls tests required by the Sarbanes-Oxley Act of 2002.

3. A company and its management may be liable if legal obligations (such as filing quarterly and annual financial statements) are not satisfied.

4. A private company will generally report to a smaller group of investors and has more control over who those investors are. Management at a publicly-owned company, who may have to consider the opinions of shareholders, may lose some managerial flexibility.

5. When a company is public, they are required to share important information about the business, such as financial statements and disclosures, contracts, and customers and suppliers. This exposes a company to a considerable amount of scrutiny. This information is also available to a business’s competitors.

IPO Alternatives

Since the heady days of the dot-com bubble, when many new companies were going public, startups have become more disgruntled with the traditional IPO process. Some of these businesses often complain that the IPO model can be time-consuming and expensive.

Particularly in Silicon Valley, the U.S. startup capital, many companies are taking longer to go public. Hence, the emergence of so many unicorn companies–businesses with valuations of $1 billion or greater.

In recent years, alternatives to the traditional IPO process have also emerged. Here’s a closer look at some of them.

Recommended: Guide to Tech IPOs

Direct Listings

In direct listings, private companies skip the process of hiring an investment bank as an underwriter. A bank may still offer advice to the company, but their role tends to be smaller. Instead, the private company relies on an auction system by the stock exchange to set their IPO price.

Companies with bigger name brands that don’t need the roadshows tend to pick the direct-listing route.

SPACs

Special purpose acquisition companies or SPACs have become another common way to go public. With SPACs, a blank-check company is listed on the public stock market.

These businesses typically have no operations, but instead a “sponsor” pledges to seek a private company to buy. Once a private-company target is found, it merges with the SPAC, going public in the process.

SPACs are often a speedier way to go public. They became wildly popular in 2020 and 2021 as many famous sponsors launched SPACs.

Recommended: Why Are SPACs Suddenly So Hot

Crowdfunding

Crowdfunding is collecting small amounts of money from a bigger group of individuals. The advent of social media and digital platforms have expanded the possibilities for crowdfunding.

One 2020 report found that $17.2 billion is generated in North America annually through crowdfunding. The average crowdfunding campaign has raised $824, with the average pledge by a backer by $88.

Is an IPO a Good Investment?

An IPO, by definition, gives the investing public an opportunity to own the stock of a newly public company. However, the SEC warns that IPOs can be risky and speculative investments.

IPO Market Price

To understand why investing in an IPO can be risky, it is helpful to know that the business valuation and offering price have not been determined not by the market forces of supply and demand, as is the case for stocks trading openly in a market exchange.

Instead, the offering price is usually determined by the company and the underwriters who negotiate a price based on an often-competing set of interests of involved parties.

Post-IPO Trading

Purchasing shares in the market immediately following an IPO can also be risky. Underwriters may do what they can to buoy the trading price initially, keeping it from falling too far below the offering price.

Meanwhile, IPO lock-up periods may stop early investors and company executives from cashing out immediately after the offering. The concern to investors is what happens to the price once this support ends.

Data from Dealogic shows that since 2010, a quarter of U.S. IPOs have seen losses after their first day.

Getting into IPOs Early

Even if an investor were to feel comfortable with the risk, they may not have access to the stock being offered in an IPO. IPO investing is sometimes limited to those with access to the investment bank that acts as the IPO’s underwriter.

If an investor is a client of an underwriter involved in the IPO, they may have the opportunity to directly participate in the IPO by purchasing the shares. Usually, though, underwriters will distribute IPO shares to their “institutional and high net-worth clients, such as mutual funds, hedge funds, pension funds, insurance companies, and high net-worth individuals.”

Therefore, the average investor may not have the chance to “get in on the ground floor.” Instead, investors may try accessing shares in the “secondary market,” which is another name for the stock exchange, in the days following an IPO. An investor could try to buy shares of a recently-public company through their brokerage bank or online investing platform as they become available.

IPO Due Diligence

Investors with the option to invest in an IPO should do so only after having conducted their due diligence. The SEC states that “being well informed is critical in deciding whether to invest. Therefore, it is important to review the prospectus and ask questions when researching an IPO.”

Investors should receive a copy of the prospectus before their broker confirms the sale. To read the prospectus before then, check with the company’s most recent registration statement on EDGAR , the SEC’s public filing system.

The Takeaway

Initial public offerings or IPOs are a key part of U.S. capital markets, allowing private businesses to enter the world’s biggest public market. Conducting an IPO is a multi-step, expensive process for private companies but allows them to significantly expand their reach when it comes to fundraising, liquidity and brand recognition.

For investors, buying an IPO stock can be tempting because of the potential of getting in on a company’s growth early and benefiting from its expansion. However, it’s important to know that many IPO stocks also tend to be untested, meaning their businesses are newer and less stable and that the stock price hasn’t been fully vetted by scrutinizing public investors yet.

SoFi Invest® allows investors to access IPO shares before they get listed on the public stock market. That means eligible individual investors who have an Active Investing account with SoFi can buy shares at the IPO price before they’re trading on a stock exchange. This opportunity has traditionally only been available to institutional investors.

Check out the IPO Investing center on SoFi Invest today.


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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.
IPOs: Investing early in IPO stock involves substantial risk of loss. The decision to invest should always be made as part of a comprehensive financial plan taking individual circumstances and risk appetites into account.
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.
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