Investing Archives

Sep

2025

What Is a Direct Stock Purchase Plan (DSPP)?

By Matthew Zeitlin | Growing Wealth, invest, Investing | Comments Off

Table of Contents

Direct Stock Purchase Plans (DSPP), Explained
Pros and Cons of a DSPP
How To Invest in a DSPP
What to Consider Before Buying DSPPs
FAQ

A direct stock purchase plan (DSPP) is a plan that allows investors to purchase stock in a company without a broker and get it directly from the company instead. With DSSPs, fees, if any, are often low.

Meanwhile, discounts to the share prices may be available for larger purchases. With shares purchased through a DSPP, investors have the same profit and loss opportunities, access to dividends, as well as stockholder voting rights. However, direct stock purchase plans may not be right for every investor.

Key Points

• A Direct Stock Purchase Plan (DSPP) allows company stock to be purchased directly, often at a discount, without a broker.

• DSPPs may offer a low initial investment, dividend reinvestment, and shareholder rights, making them accessible for long-term investors.

• Potential drawbacks include limited diversification, investment caps, and fees when selling shares.

• Commission-free trading in brokerages has reduced the cost-saving appeal of DSPPs.

• Companies such as Walmart, Coca-Cola, Starbucks, The Home Depot, and Best Buy offer or have offered DSPPs to investors.

Direct Stock Purchase Plans (DSPP), Explained

What is a direct stock purchase plan? Typically, many investors use a broker to buy shares of stock. But you can sometimes purchase stocks directly from companies, no broker required. This is what it means to participate in a direct stock purchase plan.

Many blue-chip stocks tend to offer DSPPs. For example, let’s say Company X offers a plan that allows investors to buy $500 or more worth of company stock directly from it, up to $250,000 a year, with some service and transaction fees.

With a DSPP, investors directly purchase shares, sometimes at a small discount. Discounts can range from 1% to 10% to encourage investors to buy more shares. However, because many brokerage accounts now waive fees and commissions entirely for many investors, the savings difference is smaller than it used to be.

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

Pros and Cons of a DSPP

Direct stock purchase plans have benefits and drawbacks.

Pros

Pros of DSPPs include:

• No broker needed. Investors can purchase shares of stock directly from the company.

• Very little money is required to get started, and the process is typically simple to do, making them good for long-term investing.

• Some DSPP programs offer dividend reinvestment plans.

Cons

Cons of DSPPs include:

• An investor may not achieve portfolio diversification because not all stocks offer DSPPs.

• Companies may put maximum limits on how much an individual investor can purchase.

• When selling DSPP stocks, multiple types of fees can sometimes be charged.

How To Invest in a DSPP

Armed with information about how to buy directly from companies, investors may want to explore what specific opportunities exist. Perhaps they already have a publicly traded company in mind. In that case, they can go to that company’s investor relations website to see if the company offers this type of investment opportunity.

They can also search on the Internet to see which direct stock purchase plans are available.

More specifically, if someone wants to buy stocks in this way, they typically open an account and make deposits into it. Usually, these deposits are automatically made monthly through an ACH funds transfer from the investor’s bank account. In some cases you can write checks as well.

Then, that dollar amount is applied toward purchasing shares in that company’s stock, which can include fractional shares. For example, let’s say that one share of a company’s stock currently costs $20. If an investor sets up an ACH withdrawal of $50 monthly, then, each month they have purchased 2.5 shares of that company’s stock.

One of the benefits of investing through a direct stock purchase plan is the ability to incrementally invest in an inexpensive way. This might make it a good choice for some first-time investors with smaller amounts of money to invest, with initial deposits ranging from $100 to $500. In some cases, initial deposit minimums can be waived if you purchase a certain dollar value of stock every month. But again, it may be difficult to achieve portfolio diversification with DSPP.

Companies With DSPPs

A number of large, well-established companies offer DSPPs. Companies with direct stock purchase plans include Walmart, The Coca-Cola Company, Starbucks, and The Home Depot, and Best Buy, among others.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

What to Consider Before Buying DSPPs

When online investing was new, people typically needed to pay significant fees to brokers to buy stock. In that era, direct stock purchase plans could be money-savers for investors. Over time, though, fees for online investing have lessened, making this less distinctive of a benefit.

In addition, many DSPPs charge initial setup fees, and may have other investment fees, including ones for each purchase transaction or sale. Although they may be small, these fees can build up over time. And it may be challenging to re-sell shares without the use of a broker, which makes this investment strategy more of a long-term one.

Plus, any time a share is purchased, some degree of stock volatility comes along with it, though the level of volatility that may exist depends on many variables.

Here’s something else to consider: When owning stock in just one company, or only a couple of them, portfolios aren’t diversified. When you diversify your investment assets, it helps to spread out the degree of risk. That’s because, if one stock’s value decreases, others may rise to balance out that portfolio.

The Takeaway

Direct stock purchase plans are when individual investors can directly purchase shares of that company’s stock without the need for broker involvement. The benefits of DSPPs potentially include purchasing company shares at a discount, and not needing a broker to make the transaction.

The downside of DSPPs is that a limited number of companies offer them, which means that an investor who invests solely through DSPPs may not have the best portfolio diversification.

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

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What is the difference between a brokerage and a direct stock purchase?

The main difference between a brokerage and a direct stock purchase is this: With a direct stock purchase, an investor buys shares of one company. A brokerage, on the other hand, offers multitudes of different stock options an investor may choose from.

What is direct stock vs portfolio stock?

With direct stock, an investor purchases shares of stock directly from a company. A portfolio refers to a collection of different types of investments an investor may have, including stocks, bonds, or stock funds, to name a few.

What is the difference between DSPP and DRIP?

By using a DRIP (dividend reinvestment plan), investors can buy more stock in companies whose shares they own by reinvesting what they earn from dividends. With a DSPP, an investor can purchase stock directly from a company. Unlike a DRIP, they don’t have to use dividends to purchase shares.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

¹Claw Promotion: Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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

Dollar Cost Averaging (DCA): Dollar cost averaging is an investment strategy that involves regularly investing a fixed amount of money, regardless of market conditions. This approach can help reduce the impact of market volatility and lower the average cost per share over time. However, it does not guarantee a profit or protect against losses in declining markets. Investors should consider their financial goals, risk tolerance, and market conditions when deciding whether to use dollar cost averaging. Past performance is not indicative of future results. You should consult with a financial advisor to determine if this strategy is appropriate for your individual circumstances.

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

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.

SOIN-Q325-119

Sep

2025

What Is Volume in Stock Trading? How Investors Can Use It

By Austin Kilham | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is Volume in Stocks?
What Does Stock Volume Tell You?
Where Can You Find Stock Volume on a Chart?
How Traders Can Use Volume
Types of Indicators to Measure Stock Volume
FAQ

In stock trading, volume refers to the number of shares traded in a specific time period. When demand is high and the number of shares traded goes up, the volume goes up. Similarly, when sales are down, that stock’s trading volume drops.

Some investors may analyze volume as a part of a technical analysis strategy to help them make decisions about when to buy and sell a particular stock. Here’s a closer look at volume and how investors may be able to use it.

Key Points

• Stock trading volume is the number of shares traded in a specific time period.

• High trading volume can indicate strong interest in a stock, and high liquidity.

• Low trading volume can signal less enthusiasm, market uncertainty, or lower liquidity.

• Analyzing volume helps investors understand the strength of price trends and potential reversals.

• Various technical indicators, like On Balance Volume (OBV) and Volume Price Trend (VPT), use trading volume to aid investment decisions.

What Is Volume in Stocks?

Trade volume for stock and other securities tells investors how frequently shares in a company are being bought and sold.

Every buy and sell transaction of a particular stock helps contribute to its trade volume. A transaction takes place when a buyer agrees to purchase the shares a seller has put up for sale. If this type of transaction takes place 100 times during a day for a particular stock, that stock has a trade volume of 100.

For stock futures and options trading, volume is based on how many contracts change hands during the set period.

Volume doesn’t tell the whole story of a stock. There are a couple of terms that can help give investors a better idea of the size of a company and how many shares are actually available, including “float” and market capitalization, or market cap.

Volume vs Float

While volume is the number of shares that are being actively traded during a given period, float is the number of shares that are actually available to trade. This total does not include restricted shares, which are not registered and are usually given to corporate leaders as part of a compensation package. Outstanding shares refers to all of the stock a company has issued, including restricted shares.

Stocks that have a small number of shares — usually between 10 million and 20 million — available to trade are what is known as “low-float” stocks. Large corporations, by contrast, could have floats of billions of shares.

In certain circumstances when trade volume is very high, volume can surpass float or even number of outstanding shares.

Volume vs Market Cap

Market cap is the total number of outstanding shares multiplied by the current public market price. In other words, it’s the dollar amount required to buy up all outstanding shares of a company, including restricted shares.

Market cap helps investors understand the size of one company relative to another. For example, large-cap stocks tend to be companies worth $10 billion to $200 billion, while small-cap stocks tend to be companies worth $250 million to $2 billion.

Investors can calculate free-float market cap by excluding restricted shares.

What Does Stock Volume Tell You?

Stock volume tells investors how much demand there is for a stock. The greater the volume, the more demand there is, while smaller volume translates to lower demand

High trade volume can also indicate that stock orders are being executed quickly and that the market is highly liquid. In other words, high volume can mean that buying and selling the stock is relatively easy.

What It Means When Stock Volume Goes Up

When stock volume is on the rise, it typically means that prices are on the move, either in the upward or downward direction. As volume increases, it can mean that investors are committing to the price change; a trend may be gathering strength.

Generally speaking, higher volume means that there’s increased interest in buying a stock, and that the market for that stock is more liquid, making it easier to buy and sell shares.

What It Means When Stock Volume Goes Down

When stock volume starts to decrease, it can signal that investors are less enthusiastic about a company. Volumes can decrease even as stock prices increase.

Low volume can be a signal for investors to be cautious about a stock. It can signal market uncertainty, the possibility of stock volatility on the horizon, and lower liquidity.

Recommended: Stock Market Basics

Where Can You Find Stock Volume on a Chart?

Investors can usually find information about volume next to or below the stock chart provided by trading platforms or media sources, like Yahoo Finance or the Wall Street Journal.

Often, volume is tracked using a candlestick chart, in which investors look for patterns to help make investment decisions. Normally, candlestick charts measure a stock’s price, including highs, lows, and opening and closing prices over a given period.

The resulting figure looks a bit like a candle with a line, or “wick,” that represents highs and lows and a rectangle that marks opening and closing prices. Volume candlestick charts use the width of the rectangle to indicate volume. The higher the volume, the wider the candle.

How Traders Can Use Volume

We’ve already seen that volume can help investors understand when a price trend is picking up steam. There are a few other basic guidelines investors may want to consider as they’re deciding when to buy and sell stocks.

Exhaustion Moves

Exhaustion moves occur when there is a sharp movement in the price of stock coupled with a sharp increase in trading volume. This potentially signals the end of a current price trend. These moments can be accompanied by a period of volatility.

Price Reversals

If the price of a stock has moved in one direction for a long time and volume begins to increase at the same time that prices start to move very little, it can signal a reversal. So if stock prices were on an upward trajectory, changes start to slow and volume increases, it might mean the trend is about to reverse.

Breakouts

A breakout is a point at which changes in market trends occur. Changes in volume can clue investors into the strength of the breakout. Little change in volume suggests investors are paying the breakout little heed, while big changes in volume indicate a strong new trend.

Bullish Signals

Volume can also help investors identify bullish signs that suggest prices are likely to rise. For example, say stock prices increase and then decline. At the same time there is an increase in volume which drives prices up again. The stock again declines, but if it doesn’t decline the second time as much as it did the first time, it may be a bullish signal that prices will continue to rise.

Types of Indicators to Measure Stock Volume

There are a number of volume indicators that could help traders make investment decisions based on their approach and goals. Here are a few examples.

On Balance Volume (OBV)

On balance volume (OBV) is a cumulative technical indicator in which volume is added on days when overall volume is up and subtracted on days when overall volume is down. The direction of the indicator is what is most important to investors. When price and OBV are moving up or down together, it is likely the trend will increase in strength.

Volume Price Trend (VPT)

Similar to OBV, volume price trend measures cumulative volume. However, it differs in that it considers a percentage increase or decrease in price. VPT helps investors relate share price to trading volume. If the price of a stock increases, so does the value of the indicator. If prices fall, the indicator value falls, too.

Ease of Movement

This indicator helps traders see how easy it is for a stock price to move between levels based on trading volumes. Stocks that continue along a trend for a given period are considered “easy.” This indicator is used over longer time periods and in volatile markets in which it can be hard to spot trends.

The Takeaway

Stock trading volume measures the amount of shares traded in a given day or time period. Trading volume can also apply to other types of securities and derivatives, where contracts are traded. Examining volume and other tools in technical analysis can help investors make decisions about when to buy and sell stocks.

When buying any individual security, investors should be sure to consider how it fits into their overall financial plan, including their goals, risk tolerance, and time horizon.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Is high trading volume good?

High trading volume indicates an uptrend in a stock’s shares being traded, which is often a sign of investor interest. This may lead to higher prices, but trading volume is only one indicator that investors should consider when buying and selling stocks or other securities.

Can trading volume rise, but prices fall?

Yes. If trading volume is high, but prices are dropping, that could indicate that there is downward pressure on that stock price — or it could be a bullish signal, that there might be a price reversal. Again, it’s wise to use more than one indicator to assess price trends.

What does low trading volume mean?

Low trading volume often indicates a lack of liquidity, which means that it can be harder to buy and sell shares. Low volume also indicates a lack of interest or demand for the stock.

Photo credit: iStock/shapecharge

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q325-103

Sep

2025

Understanding Stock Market Corrections

By Samuel Becker | Growing Wealth, Investing | No Comments

Table of Contents

What Is a Market Correction?
The Nature and Frequency of Market Corrections
Navigating Through Market Corrections
Identifying Causes and Signs of Market Corrections
Coping With Market Corrections as an Investor
Real-World Examples of Market Corrections
FAQ

A stock market correction occurs when the market hits a new high, and then falls by at least 10%. A correction is similar to a dip or crash, but not as severe as a “bear market,” which is when the market sees a decline of 20% from a recent market peak.

Stock market corrections are normal and it’s important to be aware of why they happen and what you might consider doing the next time the market sees a correction.

Key Points

• A stock market correction is a 10% drop from a recent peak.

• Corrections are a normal part of the market cycle.

• Remaining calm and reassessing the portfolio is advised.

• Diversification and a long-term strategy can help manage volatility.

• Cashing out and buying more during downturns can be advantageous, though risky as well, as it’s a form of trying to time the market.

What Is a Market Correction?

A stock market correction happens when the market reaches a new interim high and then falls by 10%. Some other stock market terms for market downturns include dips or crashes, which may be temporary or quick drops in the market that don’t see the market fall past 10%.

Corrections vs Bear Markets

A bear market is a longer decline in the stock market, and refers to the market after it declines 20% or more from a previous high. These terms can also apply to individual stocks (“Stock X is in correction territory,” for example), but individual stocks can see much more volatility than the overall market.

The most severe stock market correction in history, in terms of points, happened in 2018, when the Dow declined 1,175 points in a single day. Previously the record had been a 777-point decline.

However, the 2018 4.6% drop wasn’t the biggest decline in terms of percentage. In 1987, on a day called Black Monday, the Dow dropped by 22.6%. That would be equivalent to 5,300 points in today’s market.

Market Correction vs Market Crash

It can be tempting to use the terms “crash” and “correction” interchangeably, and sometimes, that may be appropriate. But in a more general sense, a “crash” refers to a more sudden and drastic fall in the market. Whereas a correction may occur over weeks, a crash could happen within a single day or days.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

The Nature and Frequency of Market Corrections

Stock market corrections happen every once in a while. They are, in fact, a normal part of the market cycle. That’s important for investors to keep in mind, as it’s not unusual at all for the market to experience a correction.

How Common Are Market Corrections?

Dating back to the mid-1900s, stock market corrections have typically happened three to four times every year. Although it’s nerve-wracking every time, these corrections are a normal part of the market cycle, as mentioned.

Duration and Impact of Corrections

When a correction occurs, you will likely see the media speculate whether it’s a crash or a correction, how long the correction will last, and perhaps, if the economy is going into a recession. This speculation is just that; there is no way of knowing exactly how big a correction will be or how long it will last.

A stock market correction is not typically the cause of a recession, nor is it a predictor of a coming recession. Stock market corrections can be stressful for investors and companies, but they are not necessarily signs of a poor economy.

Although there is no way of predicting how long a market correction will last, you can look to past data as some indicator of possible trends.

Average Market Recovery Time After Corrections

While corrections can happen quickly or play out over a prolonged period, a full recovery generally happens within a few months, per past market data.

Navigating Through Market Corrections

Given that market corrections are common, investors would do well to know how to handle them. That may or may not involve making any changes to your portfolio.

Preparing Your Investments for a Correction

Unless you exclusively own stocks in an S&P 500 index fund, your portfolio may perform differently from the overall market. When a stock market correction occurs, the percentage drop is generally referring to the performance of the S&P 500 index. This is an index of the largest U.S. companies in the stock market.

The stocks in your portfolio may fall in value more or less than the overall market. Some of your stocks may even go up in value. It’s important to remember that if your portfolio drops by a certain percentage, it will need to go up more than that percentage to recoup your losses.

Strategies for Investing During Corrections

Generally, a good rule of thumb is to stay invested through a market correction — or, stick to a buy-and-hold strategy. If, for example, someone sells off their stocks during a panic, they could see them go back up in value again in a few days or weeks. If anything, depending on your strategy and goals, you may want to consider buying stocks during a market correction, because prices will have lowered.

You could consider whether you have available funds you’d like to invest during a downturn, and decide if you want to purchase more shares of stocks you already own or if you want to find new stocks to buy. Diversifying the stocks in your portfolio may help you weather the storm of a market correction.

If you do choose to purchase stocks during a market correction, be aware that their value may continue to decline before it recovers again. There’s also no guarantee that it will.

Also remember that the market has bounced back from some severe corrections and crashes over the years. Corrections happen every year and can be healthy for the market.

Behavioral Biases to Watch During Corrections

For investors, corrections can be disorienting and emotionally fraught. You feel like you need to make a move, especially if you’re seeing the value of your holdings decline before your eyes.

With that in mind, it’s a good rule of thumb to try and disconnect from your emotions and make grounded decisions in line with your investment strategy. That may mean you don’t do anything at all; it may mean that you actually invest more to take advantage of a dip in prices. The point is, corrections are often a time during which markets are in flux, and you should do your best to keep a cool head while things play out.

Identifying Causes and Signs of Market Corrections

There can be numerous reasons that the market experiences a correction. And they typically can’t be predicted with any real sense of accuracy.

Key Factors Leading to Corrections

Since so many things could potentially lead to a market correction, it’s hard to say with any certainty what, exactly, is or was the catalyst. But generally, things like rising prices (inflation), slow economic growth, bad or disappointing corporate earnings reports, or even surprising news — say, a war breaks out, or some sort of political upheaval takes place — can cause the market to see a steep decline into correction territory.

Can Market Corrections Be Predicted?

As mentioned, market corrections can’t really be predicted. While it’s almost certain that there will be corrections in the future, discerning when, exactly, they’ll happen is nearly impossible — nobody has a crystal ball.

Technical Indicators That May Signal a Correction

There are many technical indicators that could possibly signal a market correction. Some are fairly common and straightforward, while others are not. That can include certain candlestick patterns, the Hindenburg Omen, and the Elliott Wave, among other things.

It can also include looking at moving averages, and trends of market indexes to get a sense of which way the market is heading.

Coping With Market Corrections as an Investor

Market corrections are going to happen, it’s a near certainty. But that doesn’t mean investors need to panic every time the market has a hiccup.

What to Do During a Market Correction

The first step in knowing what to do during a stock market correction is to find out why it’s happening. If possible.

Next, look into your individual portfolio and see how it’s being affected by the correction. This will help you decide whether to buy, sell, or hold on to the stocks in your portfolio.

Remember that stock market corrections are normal. If you have a long-term investing strategy, you will likely see market corrections, bear markets, and recessions during your years of investing. Try to stay calm and reconsider decisions that might be made based on fear or panic. It may not help to obsess over the value of your portfolio on any particular day.

Long-term Strategies for Handling Market Volatility

In terms of handling market volatility over the long term, here are some things and overarching principles investors can try to incorporate into their investment strategy.

• Have a plan: Buying stocks without a plan can lead to an emotional rollercoaster when they fall in value. Know what your goals are and plan for them, being aware that market volatility is a part of investing. Even when the market corrects, remember that you may still reach your goals for the year or over the long-term if you planned for them. If you’re investing money to use in just a few months versus for your retirement, your strategy may look very different.

• Diversify: One way to help protect your portfolio from significant market crashes is to spread out investments over different types of assets. This is called diversifying your portfolio, and this tactic may help lower your risk of losses while still exposing yourself to potential gains. You can diversify into many different types of investments, including bonds, real estate, commodities, and simply by holding cash.

• Consider cashing out: Investors can be afraid to cash out of a particular stock because it may continue to rise in value. If you own a stock which has gone up significantly, you may want to cash out some of the investment and diversify it into other investments.

• Keep risk tolerance in mind: If you are growing your portfolio for long-term use, you can likely handle a few ups and downs in the market cycle. However, if it causes you too much stress to see your portfolio go down in value a lot in one day, perhaps it’s better not having so much invested in stocks.

• Don’t try to time the market: On the same note, selling off your investments because you think the market is going south may not be a great strategy. The stocks you’re holding may continue to go up in value, and even if they do crash, trying to time your reentry can be just as challenging as timing your exit.

• Think long term: Day trading and short-term investing are risky. If you build a diversified portfolio which you plan to keep invested for a long time before using it, it may be able to withstand cycles in the market and still continue to grow.

Emotional Discipline and Investor Psychology

As discussed, market corrections can be psychologically trying for investors. That’s especially true for those who don’t have much appetite for risk. So, it can be important to keep your wits, remain disciplined, and keep your larger strategy or investment plan in mind. Truthfully, investors should anticipate market corrections; they’re going to happen whether you like it or not.

So, remember that corrections are simply a natural part of the market cycle, and do your best to stick to your strategy.

Real-World Examples of Market Corrections

As noted, corrections are common. In fact, the S&P 500 entered correction territory three times during 2022. It also happened more than once in 2023, and as of writing, the most recent market correction occurred during October 2023, as the market slid for a few months after topping out at a previous high in July 2023.

The Takeaway

Stock market corrections are when the market falls 10% from a previous high, and they’re common parts of the market cycle. As you build your portfolio and mentally prepare for the next stock market correction, remember that you are not alone. Market crashes, dips, and corrections are stressful for everyone, and there are tools and specialists to help you navigate them.

Working with an investment advisor may help you stay calm throughout economic cycles. Planning your portfolio for diversification and long-term growth may also help you ride the waves of the market.

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What happens in a stock market correction?

During a stock market correction, the market slides at least 10% from a previous high due to any number of factors.

Are corrections good for the stock market?

Corrections can be good for the stock market in a similar way that a wildfire can be good for a forest — they can serve as a reset to valuations that may have gotten too high, and lower security prices for investors looking to deploy capital.

How long do stock market corrections last?

There’s no telling how long a correction could last, but it’s important to keep in mind that historically, the market has always bounced back given enough time.

What is the biggest stock market correction of all time?

The biggest drop in the S&P 500 in a single day was in October 1987, when the index fell more than 20% into a bear market.

How often should you expect a stock market correction?

Since the 1950s, the S&P 500 has experienced dozens of market corrections, and that means that one occurs less than every two years, on average.

How many corrections have there been throughout history?

Since 1974, there have been 27 market corrections, while only six of those grew in severity to become bear markets.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q325-060

Sep

2025

How Often Are Dividends Paid?

By Pam O’Brien | Growing Wealth, invest, Investing | Comments Off

Dividends are a portion of earnings that a company pays to certain shareholders who own dividend-paying stock. Dividends are generally paid quarterly, although the timing of dividend payments can vary depending on the company: some dividends might be monthly, or twice a year.

Most companies pay dividends in cash, or as additional shares of stock. Investors can take dividend payouts to supplement income or savings (or other goals). They can also reinvest their dividends as part of a dividend reinvestment plan, or DRIP.

Not all companies pay dividends, however. And just because a company pays dividends now doesn’t mean it will continue to do so. A company can stop paying dividends at any time.

Investors may be qualified to receive dividends depending on when they purchase shares of stock. It’s important to understand the key dates regarding dividend payouts.

Key Points

• Dividends are a portion of a company’s earnings paid to qualified shareholders typically each quarter.

• Some stocks may pay dividends monthly, semi-annually, annually, or on an irregular schedule.

• Dividends can be paid in cash, company stock (often through dividend reinvestment plans), or, rarely, as property.

• Key dates involved in dividend payments include the declaration date, date of record, ex-dividend date, and payment date.

• Dividend income is taxable, with the tax rate depending on whether it’s a qualified or nonqualified dividend and the investor’s tax situation.

What Are Dividends?

Companies will sometimes share a portion of their profits with shareholders, and this is called a dividend. Dividends are typically distributed as cash, although it’s also possible to receive a dividend in the form of stock (or some other asset).

Typically, dividends work on a per-share basis. Investors who buy stocks online or through a traditional brokerage can look for dividend-paying stocks. For example, if Company A pays a quarterly cash dividend of 50 cents per share, and an investor owns 50 shares, they would receive $25 in cash every quarter.

If a company pays a stock dividend, it’s usually a percentage increase in the number of shares an investor owns. So if Company A awards a 5% stock dividend and an investor owns 100 shares of Company A, they would have 105 shares after the dividend payout.

Remember that dividend income is taxable (see below), and dividends are not guaranteed. A company may start or stop paying dividends at any time.

Recommended: Stock Market Basics

How Often Are Dividends Paid Out?

In most cases in the U.S., dividends are paid quarterly, on the same schedule as the company must report earnings.

If you’re wondering why companies generally pay quarterly vs. monthly dividends, it makes sense that dividends would come only after a company has finalized its income statement and its board of directors has reviewed (and approved) the numbers.

Some investments pay dividends on other schedules, such as twice a year, once a year, or monthly, for monthly dividend stocks, or on no schedule at all (called “irregular” dividends, though this isn’t typical in the United States). Ultimately, the dividend payout schedule is up to a company’s board of directors.

It’s also possible for a company to pay a special one-time dividend. Usually a special dividend is paid out when a company has had a stronger-than-usual earnings period or has excess cash on hand — from the sale of a business, perhaps, or the liquidation of an investment, or a major litigation win. These special one-time dividends may be paid as cash, stock, or property dividends.

When it comes to mutual funds that invest in dividend-paying companies, they may pay dividends on a more frequent basis, such as monthly or even weekly. It may be possible to invest in dividend funds, or even dividend stocks, when you open an IRA.

Important Dividend Dates

There are four essential dates involved in the payment of dividends. It’s important for investors to pay attention to these dates, to ensure they’re getting the dividend payout they hope for.

1. Declaration date. Also called the announcement date, this is the day that a company’s board of directors states their intention to pay a dividend. It’s typically announced every quarter.

2. Date of record and ex-dividend date. The record date and the ex-dividend date used to be separate dates. Now owing to the T+1 settlement rule, whereby trades must settle within one business day, they are typically the same in the U.S.

Nonetheless, they signify two different actions by the company which can impact investors. The first is the date of record: shareholders must be on the company books before this date in order to get the dividend. Shareholders who buy stock on or after this date, which is also the ex-dividend date (i.e., the date that quarter’s dividend expires), will not qualify for the dividend and it will go to the seller for that quarter.

Note that if the date of record falls on a weekend or holiday, the ex-dividend date in that case is the business day before.

3. Payment date: This is when dividends are paid to company shareholders.

IMPORTANT DIVIDEND DATES for 5 Companies in the S&P 500 Dividend Aristocrats Index, paying qualified dividends, as of 9/03/25
Company	Dividend Payout	Declaration Date	Record Date / Ex-Dividend Date	Payment Date
Kimberly-Clark Corp (KMB)	$1.26	Aug. 1, 2025	Sept. 5, 2025	Oct. 2, 2025
Leggett and Platt (LEG)	$0.05	Aug. 7, 2025	Sept. 15, 2025	Oct. 15, 2025
Farmers & Merchants Bancorp (FMCB)*	$5.00	Aug. 2, 2025	Sept. 11, 2025	Oct. 1, 2025
3M Company (MMM)	$0.73	Nov. 5, 2025	Nov. 14, 2025	Dec. 12, 2025
Gorman-Rupp Company (GRC)	$0.19	Oct. 24, 2025	Nov. 14, 2025	Dec. 10, 2025

Source: dividend.com, as of 9/03/25.
*Semi-annual dividend

Typically, investors can get information about a company’s dividend dates by visiting its investor relations page. To find this, search for the company’s name and “investor relations” online. Or check a company’s dividend history online. Many investment websites, including Nasdaq.com, track this information.

When Are Dividends Paid?

Once a company’s board of directors approves a plan to pay out dividends, the company announces the dividend payment information, including: the dividend amount to be paid, the date it will be paid, and the date of record and the ex-dividend date (which typically occur together, unless the record date falls on a weekend or holiday).

On the payment date, the dividend is paid to investors who owned the stock before the ex-dividend date. Consider the following hypothetical example:

• Company A announces its dividend payout on September 1, 2025. This is the declaration date for a dividend payout on Sept. 17.

• Sunday, Sept. 14 is the record date. Shareholders must be on record as owning the company stock before September 14, in order to get the dividend.

• The ex-dividend date cannot fall on a weekend or holiday, so it’s set to the business day before the record date: Friday, September 12, 2025. In order to get the dividend, an investor must buy shares before the ex-dividend date.

• The dividend itself will be paid on Wednesday, Sept. 17, 2025.

Different Dividend Payout Methods

These are some of the ways dividends may be paid to investors.

Cash Dividends

Dividends are often paid in cash. Companies typically send cash dividends directly to an investor’s brokerage, where the money is deposited into their account. The company might also mail a check to stockholders.

Company Stock Dividends

In other cases, investors will be paid in company stocks. Some companies and mutual funds offer the option of a dividend reinvestment plan (DRIP) that will automatically buy additional shares for an investor with their dividends. This provides the advantages of both simplifying the process (since investors won’t have to receive the cash and buy more shares themselves) and potentially being more cost effective, since many DRIP programs don’t charge commissions.

Additionally, some DRIP programs discount the purchase of additional shares. For this and other reasons, some investors may specifically look to find dividend reinvestment stocks.

Property Dividends

More rarely, a company might award a property dividend instead of cash or stock payouts. This could include company products, shares of a subsidiary company, or physical assets the company owns.

Are Dividends Taxable?

Dividend income is always taxable, but tax treatment depends on the type of dividend the shareholder gets (qualified or nonqualified dividends), as well as the type of account in which the dividend stock is held.

The Type of Account Impacts How Dividends Are Taxed

For instance, if an investor is holding the investment in a retirement account such as a 401(k) or IRA, the dividend isn’t taxable the year it’s paid because it’s deposited in a tax-deferred account.

In this case, though, any dividend income would be taxed along with any other funds upon withdrawal in retirement.

If an investor holds dividend funds or dividend-paying stocks in a Roth IRA, the tax treatment is different. Here, contributions are after tax, and withdrawals are tax free.

If the investment is held in a taxable account, like a brokerage account, then a dividend is considered income, and the tax rate will depend on whether it’s a qualified dividend or nonqualified (ordinary) dividend.

Tax Rate for Qualified Dividends

These are dividends paid by a U.S. corporation or a qualified foreign corporation on stock that an investor has held for a certain period of time — generally more than 60 days during the 121-day period that starts 60 days before the ex-dividend date.

For some preferred stock, the investor must have held it for 91 days out of the 181-day period starting 90 days before the ex-dividend date. Taxes on qualified dividends (vs. ordinary dividends) are paid at long-term capital gains rates, which range from 0% to 20% based on an individual’s modified adjusted gross income.

In other words, the taxes investors pay on qualified dividends are based on their overall income tax bracket, and they could pay 0%, depending on their income. Because the long-term capital gains tax rate is lower than ordinary income tax rate, qualified dividends are preferable to nonqualified dividends.

2025 Tax Rates for Long-Term Capital Gains

Following are long-term capital-gains tax rates for the 2025 tax year, according to the IRS.

Capital Gains Tax Rate	Income — Single	Married, Filing Jointly	Married, Filing Separately	Head of Household
0%	Up to $48,350	Up to $96,700	Up to $48,350	Up to $64,750
15%	$48,351 to $533,400	$96,701 to $600,050	$48,351 to $300,000	$64,751 – $566,700
20%	Over $533,400	Over $600,050	Over $300,000	Over $566,700

Additionally, note that those who have net investment income and modified adjusted gross incomes (MAGIs) over $200,000 — or couples filing jointly with MAGIs over $250,000 — may have to pay the Net Investment Income Tax (NIIT). This is 3.8% on either net investment income or the excess over the MAGI limits, whichever is less.

Tax Rate for Nonqualified Dividends

The more common type of dividend is a nonqualified — or ordinary — dividend. When companies pay ordinary dividends, they’re considered ordinary income, so an investor will be taxed at ordinary income tax rates.

In general, investors should assume that any dividend they receive is an ordinary dividend unless told otherwise. (The payer of the dividend is required to identify the type of dividend when they report them on Form 1099-DIV at tax time.)

Can You Live on Dividends?

In general, retirees may want to to live off a combination of Social Security, interest income from bonds, and selling a small portion of their investments each year. The 4% retirement rule maintains that if one withdraws no more than 4% of their portfolio each year, they’ll be able to make their nest egg last — although some financial professionals believe this formula is too conservative.

Investments that pay regular dividends may shift an individual’s retirement equation by providing steady income over time that may allow them to sell fewer investments — or no investments at all.

The amount of dividends a stock pays may grow over time as companies get larger and continue to increase their profits. But the reverse is also possible; a company could stop paying dividends, choosing to reinvest its cash in business operations.

Investing with an eye toward dividend income may allow an investor to create an income stream that could supplement their Social Security and other income in retirement.

The Takeaway

Dividends — cash or stock payments from a company to qualified shareholders — are typically paid quarterly. These financial rewards can be attractive to investors, who may seek out dividend-paying companies in hopes of boosting their income or savings.

Dividends may provide a source of consistent and predictable income, which may be a helpful addition to an individual’s portfolio, depending on their investing goals. Investors may choose to use dividend income to supplement other income or to reinvest in their portfolio.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

How long do you have to hold a stock to get a dividend?

Investors must buy, or already own, shares of the stock before the ex-dividend date, which is now the same as the date of record. The date of record is when the company reviews its records to determine who its shareholders are, and who qualifies for a dividend payout. If the date of record falls on a weekend or holiday, the ex-dividend date is the business day prior, and shareholders who buy stock on or after that date will not receive a dividend until the following quarter (or relevant time period).

Are dividends taxed if they are reinvested?

Yes. Dividends that are reinvested are considered income, just like cash dividends, and must be reported on your tax return. The way you are taxed on dividends depends on whether your dividends are qualified or nonqualified. The more common type of dividend is nonqualified, and these dividends are taxed at ordinary income tax rates. Qualified dividends are taxed at long-term capital gains rates.

What happens if you see more dividends than profit?

Typically, a portion of a company’s earnings may go to paying dividends. This is known as the dividend payout ratio. Investors typically look for payout ratios that are 80% or less — meaning that the company is not paying all of its earnings in dividends.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

SOIN-Q325-096

Sep

2025

How to Buy Bonds: A Guide for Beginners

By Austin Kilham | Growing Wealth, invest, Investing | Comments Off

Table of Contents

Why Invest in Bonds
Where Can You Buy Bonds?
What Type of Bonds Can You Buy?
How to Invest in Bonds
FAQ

Bonds are issued by governments, municipalities, and companies as a way to raise money. By investing in bonds, an investor is giving the issuer of the bond a loan for a set period of time. In exchange, the bond issuer pays the investor interest and returns the principal to them when the bond matures at the end of a predetermined period.

Investing in bonds might seem a little mystifying, but bonds can be a way for beginning investors — or any investors for that matter — to help achieve financial goals such as portfolio diversification and earning income. Read on to learn about the different types of bonds and how to invest in them.

Key Points

• Bonds function as loans to entities like the government, municipalities and companies, and they offer regular interest payments and eventual principal repayment.

• Credit ratings are a way to gauge the creditworthiness of the bond issuer and the likelihood that they will repay the debt and not default.

• Bond duration reflects how sensitive bond prices are to interest rate fluctuations.

• Investors can purchase bonds directly from the government or brokerages, or get exposure via mutual funds and ETFs.

• Before investing, investors can assess risks of bonds, including credit risk, interest rate risk, inflation risk, and liquidity risk.

Why Invest in Bonds

Essentially, investing in bonds is a method of lending money to a company or government. As investors choose between the different types of investments, there are several reasons they might opt for bonds. Bonds, which are typically fixed income investments, pay interest at regular intervals, such as twice a year, which provides investors with a predictable stream of income. Also, if investors hold the bond to maturity, they receive the entire principal amount (or par value) of the bond. In this way, investors may preserve their savings while investing.

Bonds are also an important tool for building a diversified portfolio. Compared with stocks, bonds are less volatile, so they can potentially help offset some of the risk inherent to stock investing.

However, while bonds are typically considered a less risky investment, it’s still possible to lose money when investing in them if the issuer is unable to fulfill its obligation. In addition, inflation can eat away at bond returns, since fixed returns tend to be worth less during periods of high inflation.

Where Can You Buy Bonds?

You can buy bonds in a variety from a variety of different sources, depending on the type of bond you’re interested in.

Federal Government

If you’re 18 or older, you can buy government bonds directly from the federal government through the TreasuryDirect website. The site gives investors access to Treasury bills, notes, bonds, Floating Rate Notes, Treasury Inflation-Protected Securities, and savings bonds.

Brokerage Account

Investors can buy a variety of bonds, including corporate, municipal, and government bonds, through their brokerage account. Bond prices vary depending on transaction fees and markups.

Exchange-traded Fund (ETF) or Mutual Fund

Rather than buying bonds outright, investors can gain access to them by buying shares of ETFs or mutual funds that invest in bonds.

Diversification is one main reason for investing in funds. Because issuers typically sell individual bonds in large units (a single bond might cost $1,000 or more, for instance) the average investor may only be able to purchase a few of them on their own, making it tricky to put together a diversified bond portfolio.

Meanwhile, funds typically hold a diversified basket of bonds that tracks a bond index or a certain sector of the bond market, making it much easier for individuals to diversify. It’s important to note that while the yield of individual bonds is fixed, the yield on bond mutual funds or ETFs can fluctuate over time.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

What Type of Bonds Can You Buy?

There are a few basic types of bonds you may consider buying:

Corporate Bonds

Corporate bonds are a type of debt security issued by public and private corporations. Investment banks typically underwrite the debt and issue it on the entity’s behalf. Companies use the money they raise through bond sales for a variety of purposes, such as investing in new equipment, research and development, paying investor dividends, and stock buybacks.

Municipal Bonds

States, cities, and counties issue municipal bonds, sometimes called “munis,” to finance capital expenditures like the building of new roads or bridges. There are three general types of municipal bonds:

• General obligation bonds aren’t backed by assets, but rather the “full faith and credit” of the issuer. Governments have the power to tax residents to pay bondholders back.

• Revenue bonds are backed by revenue from a specific source, such as highway tolls. That said, some revenue bonds are “non-recourse” meaning that if the revenue source disappears, bondholders have no claim to it.

• Conduit bonds are issued on behalf of private entities like hospitals.

US Treasurys

The Department of the Treasury issues U.S. Treasury bonds for the federal government. Investors typically consider Treasurys one of the safest investments, since they have the full faith and credit of the U.S. government backing them.

• Treasury bills are short-term debt obligations that mature within one year or less. They are sold to investors for less than their face value but they pay their full value at maturity.

• Treasury notes are longer-term debt securities that mature within 2, 3, 5, 7, or 10 years and pay interest every six months.

• Treasury bonds mature in 20 or 30 years and pay bondholders interest every six months.

• Treasury Inflation-Protected Securities, or TIPS, are notes or bonds that adjust payments to match inflation. Investors can buy TIPS with maturities of five, 10 and 30 years, and they pay interest every six months.

Recommended: How to Buy Treasury Bills, Bonds, and Notes

Bond Mutual Funds

A mutual fund is a pool of money that’s invested by an investment firm according to a set of stated objectives. A bond mutual fund focuses specifically on bonds. They may concentrate on one type, such as corporate bonds, or they may contain all types. Unlike traditional bonds, investors do not hold the bond funds for a set period or receive a principal payment at maturity. Rather, the value of the bond fund can fluctuate with market demand. There may also be ongoing fees and expenses associated with owning shares of the mutual fund.

Bond ETFs

Like bond mutual funds, bond ETFs represent a way for investors to pool their money and spread it across many different investments. While investors can only trade mutual funds once a day, they can trade ETFs throughout the day. ETFs may have lower fees than mutual funds.

How to Invest in Bonds

As investors are exploring investing in bonds, it’s important to consider the following factors:

Credit Ratings

Credit ratings are a way to gauge the creditworthiness of companies or governments that issue bonds. The ratings give investors an idea of how likely the bond issuer is to default. Standard & Poor’s, Moody’s, and Fitch are the three private companies that control most bond ratings. The rating system is slightly different at each company, but generally speaking, a mark of AAA represents the highest rated and least likely to default issuers, while C or D denotes the riskiest issuers.

Duration

A bond’s duration is not the same at its term, or maturity. Rather it is a measure of how sensitive a bond’s price will be to changing interest rates. The longer a bond’s duration, the more likely its value will fall as interest rates rise.

Fees

If you buy bonds through a broker, you should expect to pay transaction fees. Brokers typically markup the price of a bond when they sell it to you in lieu of charging a commission. Markups may be anywhere from 1% to 5% of the bond’s original value, though the exact amount can vary based on the type of bond, the size of the transaction, and market conditions. Look for brokerages that have low fees and markups.

Risk Level

Before buying a bond, investors should understand the associated risks, including:

• Credit risk: The risk that issuers may fail to make interest payments and default on the bond.

• Interest rate risk: The possibility that changes in interest rate will raise or lower a bond’s value if sold before maturity.

• Inflation risk: The risk that inflation will decrease the value of bond returns.

• Liquidity risk: The risk an investor won’t be able to sell their bond when they want to due to low or no demand.

Timing

You might consider matching the maturity date to your investment timeline. For example, if you need your principal in five years to make a down payment on a house, you may not want to buy a 10-year bond. While you could sell the 10-year bond after five years, market conditions could make it less valuable than if you waited until maturity.

The Takeaway

Whether purchased individually or accessed through mutual funds or ETFs, bonds provide a way for investors to diversify their portfolios. They may also be able to help investors develop a stream of income, which can become increasingly important as they move toward retirement.

Before buying a bond, it’s important to research issuers and credit ratings to be sure you aren’t taking on undue risk. In addition, investors will want to make sure that whatever they buy fits into their long-term investment plan.

Invest with as little as $5 with a SoFi Active Investing account.

🛈 While SoFi does not offer direct purchases of bonds, you can gain exposure to the bond market by purchasing bond funds through our online investment platform.

FAQ

Are bonds a safe investment?

Bonds are generally considered a less volatile investment than stocks. However, investing in bonds does involve risk. How sound a bond is depends on such factors as the issuer of the bond and whether they are able to fulfill their payment obligations, and the bond’s credit rating. Different types of bonds involve different levels of risk. For instance, U.S. Treasury bonds are considered the safest bonds because they are backed by the U.S. government and have a minimal risk of default.

Is it better to hold cash or bonds?

Whether it’s better to hold cash or bonds depends on your timeline, risk tolerance, and goals. Cash is typically better for short-term needs, while bonds may be better as longer-term investments. Both have pros and cons. Cash could lose its buying power due to inflation, but it’s a completely liquid asset and offers protection against volatile markets. Bonds can provide consistent income through regular interest payments, but they carry the risk of default — if the bond issuer defaults, you could lose some or all of your investment. Consider all these factors to decide what’s right for you.

Will you lose money on a bond if you hold it to maturity?

Generally speaking, when an investor holds onto a bond until maturity, they receive the face value of the bond, which is the amount the issuer agrees to pay at maturity, in addition to the interest received. Those planning to hold until maturity, rather than sell beforehand, may be less concerned about interest rate risk, which is when changes in the interest rate increase or decrease a bond’s value. However, holding a bond to maturity is not risk-free — there is a possibility that the bond issuer could default on the bond or that rising inflation could erode the purchasing power of the bond’s return.

Photo credit: iStock/ILIA KALINKIN

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

SOIN-Q325-086