Financial Topics Archives | Page 10 of 684

Nov

2022

Blockchain vs Distributed Ledger Technology (DLT), Explained

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

DLT vs. blockchain is an often-misunderstood topic. The terms blockchain vs. distributed ledger are often used interchangeably, but in fact blockchain technology is a subset of distributed ledger technology and they are not the same thing.

Blockchain represents a new type of distributed ledger technology (DLT) that can function without the need for third-party oversight. Peer-to-peer transactions can be verified in a decentralized way, just as they can with distributed ledger technology, but with blockchain the data is stored in blocks vs. a DLT system, which does not require a chain.

What Is Distributed Ledger Technology?

DLT is a kind of distributed database that stores information in multiple locations. Instead of a single server hosting all the information, DLT uses geographically distributed servers known as nodes to store data in different places at the same time.

Each node on the ledger processes and validates each piece of data, creating a record while establishing consensus on the validity of the dataset across all nodes.

The main characteristics of distributed ledger technology also apply to blockchains. DLTs are:

• Immutable

• Transparent

• Append-only

• Decentralized

That said, while a blockchain network is fully decentralized, with no central authority, a DLT may have some central oversight. Both systems are popular in finance, owing to the need for the speed and transparency decentralized systems can provide.

💡 Recommended: A Beginner’s Guide to Cryptocurrency

What Is a Blockchain?

A blockchain is a type of distributed ledger made up of a series of decentralized servers also known as nodes. The blockchain records information about transactions and groups them into blocks of data, which are validated by the network.

Each new block gets added to the one that came before it, forming a chain of blocks, giving rise to the term “blockchain.” All transactions and data are recorded with a unique cryptographic stamp or signature called a hash.

Blockchain was first created when the Bitcoin network went live in January 2009. Since then, new types of blockchains have been developed that have additional functionality. Many potential blockchain use cases are still being experimented with.

Understanding DLT vs. blockchain is key to understanding different types of crypto.

Blockchain vs DLT: Similarities and Differences

When it comes to the similarities and differences of blockchain vs. DLT, it’s important to understand that blockchain is a form of DLT — but not all distributed ledgers are blockchains.

How Data Is Stored

In a blockchain, records are stored in blocks or modules, after having been validated by the network. Each transaction is then given a cryptographic signature known as a hash, which is a random string of characters, which gets added to the block, forming a chain. Blocks become permanent once they’ve been added to the chain. To alter the information inside a block would require compromising the entire network.

Another one of the benefits of blockchain is that the vast majority of blockchains are also permissionless, meaning no one needs permission from a central authority to access the system. Distributed ledgers can be permissionless too, but because some DLTs can be centrally controlled, this may not always be the case.

Degrees of Decentralization

Blockchains are also decentralized to some degree, meaning they distribute their development and maintenance amongst multiple parties. There is no CEO of Bitcoin, for example, and the network is maintained by thousands of individuals around the world running their own full nodes.

Volunteer developers work on the code based on their own volition, and if the majority of nodes agree that a software update should be implemented, then it will be. Disagreement among nodes can lead to a hard fork, as occurred in 2017 with Bitcoin Cash.

Distributed ledgers, on the other hand, are owned, operated, and controlled by a single entity. This combined with the fact that distributed ledgers do not create cryptographic blocks and add them to a chain are the two main features that designate the difference between DLT vs. blockchain.

Similarities Between DLT vs Blockchain Technology

When considering a DLT vs. a blockchain, remember that both involve many of the same characteristics and functionality, including:

• A distributed ledger of data that’s transparent and immutable

• The use of geographically distributed servers known as nodes

• Some degree of decentralization

Both DLT and blockchain involve building and maintaining a distributed ledger. They both make use of servers called nodes that can be placed in many different locations around the world. And to a degree, both are decentralized, meaning there isn’t a single point of failure for the system (although DLTs may have a centralized owner vs. blockchains, which don’t).

Differences Between DLT vs. Blockchain Technology

While they are more similar than they are different, DLT and blockchains are not one in the same. Some of the ways the two differ from each other include:

• Blockchains use encryption

• Blockchains are fully transparent

• Blockchains group data into blocks, adding them to a chain

Some forms of DLT also use encryption and can be transparent. DLT can vary in its transparency, permissions, and use of encryption. Blockchains, on the other hand, are universally encrypted. They always group information into blocks, too.

Blockchain vs. distributed ledger
Similarities	Differences
Use of distributed nodes	DLT may or may not use encryption
Maintenance of a ledger	DLT does not use blocks
Some decentralization	DLT may be transparent or opaque

Other DLTs Beside Blockchain

Since the invention of Bitcoin, quite a few variations of DLTs and blockchains have been created, as mentioned. Some forms of DLT behave much like blockchains, and were intended to mimic the tech in some ways, but can’t be classified as such.

Holochain

Holochain is an “open-source framework for creating microservices that run peer-to-peer applications on end-user devices” without the need for centralized servers, according to Holochain.org.

Holochain is intended to provide a way for people to run the type of applications that blockchains enable without needing a blockchain. Holochain provides tools that can enable users to:

• Authenticate users and manage their identities

• Enforce business rules and data integrity

• Control access to both public and private data

• Create a redundant, distributed database to store and retrieve data, and automatically react to security risks

• Application code deployment and updates for user devices

• Share participants’ workload in terms of resources

Hashgraph

Hashgraph has been popularized by Hedera Hashgraph (HBAR), a tech project backed by dozens of multinational corporations.

Hashgraph enables quick, low-cost transactions, allows for the implementation of smart contracts, and has the ability to scale better than most blockchains.

Direct Acyclic Graph (DAG)

DAG is the technology behind hashgraph. DAG stores transactions in a tree-like structure that resembles a graph, rather than a chain. Due to its efficiency in data storage — data can be recorded on top of each other, rather than appended in a sequence, allowing for more than 100,000 transactions per second.

The Takeaway

DLT can be thought of as blockchain’s predecessor. Blockchain is a new type of distributed ledger that uses encrypted blocks of data and collects them into an unbreakable chain.

There are also even newer types of DLT that have built off of blockchain’s advancements. In this sense, blockchain is just one important part of the natural evolution of distributed ledger technology.

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FAQ

Is blockchain a digital ledger?

Yes, blockchain is a type of distributed ledger technology (DLT). While DLT came first, and the two share many of the same characteristics (including the validation of transactions through a decentralized system of nodes), blockchain is considered a more sophisticated form of DLT.

Is blockchain the only digital ledger?

No, blockchain is not the only type of DLT that exists. Holochain and DAG (direct acyclic graph) technology are two among several others.

Is bitcoin a digital ledger technology?

Not exactly. Bitcoin is the oldest and largest form of cryptocurrency, and it was also the first implementation of blockchain technology, which is a form of DLT.

Photo credit: iStock/LuckyStep48
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
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. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
²Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount		Bonus Payout
Low	High	Bonus Payout
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

SOIN0622016

Nov

2022

What Are Crypto Collectibles & How Are They Valued?

Guide to Crypto Collectibles

By Samuel Becker | Growing Wealth, invest, Investing | Comments Off

Crypto collectibles comprise the world of digital media that can be purchased, authenticated, and stored on blockchain networks. They’re similar to traditional collectibles — think baseball cards, Beanie Babies, artworks, and more — but they have no physical presence. They’re only digital.

Crypto collectibles take the form of non-fungible tokens, or NFTs, among other digital assets. That means that they’re one-of-a-kind. There aren’t any copies of them, which is the case with cryptocurrencies (which are considered fungible).

What Are Crypto Collectibles?

A crypto collectible is a digital asset that is created, encrypted, and stored on a blockchain. But there are distinct differences between a crypto collectible and a cryptocurrency: Crypto collectibles are non-fungible (crypto collectible and NFT can be synonymous, in most cases) and unique.

By contrast, all the different types of crypto are fungible: e.g. you can trade one Bitcoin for any other Bitcoin, it doesn’t matter — they are functionally the same.

The fact that crypto collectibles are non-fungible also means that they’re scarce, and scarcity gives them value — or perceived value — in the marketplace. Again, you can think of crypto collectibles as similar to baseball cards in the physical world. If you have a very rare baseball card (e.g. a Babe Ruth rookie card), it may carry a lot of value, because many baseball card collectors are willing to pay top dollar to get it.

Again, too, crypto collectibles are authenticated on blockchain networks, so that there’s a clear record of ownership and transactions related to any given collectible. They’re generally stored in a digital wallet, which is also how cryptocurrency works. In terms of the most common forms of crypto collectibles, it’s probably NFTs.

NFTs: Overview

As discussed, NFTs are non-fungible tokens are cryptographic digital assets that have uniquely identifiable metadata and codes, which are stored on the blockchain, ensuring that the NFT can’t be replicated or forged.

The tokens act as a representation of either digital or tangible items. For instance, one could create NFTs that stand for digital artwork, virtual real estate in a game, collectible Pokemon cards, or even someone’s personal identification information.

NFTs can take other forms as well, such as NFT music, which is exactly what it sounds like: A non-replicable audio track, stored on a blockchain network.

A lot of things can potentially be tokenized, in fact, like the first-ever tweet from Jack Dorsey, Twitter’s then-CEO.

While NFTs can, do, take numerous forms, the most important thing for most people in the crypto space to know about them is that they’re one-of-a-kind, and such, rare. That rarity is what gives them value.

How Do Crypto Collectibles Work?

Crypto collectibles such as NFTs function as assets. They can be collected, stored, or traded on marketplaces in exchange for cryptocurrencies or fiat currency, like USD (although there are some hoops to jump through before getting your hands on cash).

For instance, if you plan on selling NFTs to generate cash, you may need to go through the process of creating, or minting them to ensure you have ownership. You’d then need to determine the best marketplace to use to list and sell them. From there, you’d likely be trading your NFTs for another type of cryptocurrency, which you might then need to exchange for USD.

It’s important to keep the entire goal of NFTs in mind: To digitize, and thus lock in the value of an item, and make it relatively easy to trade, buy, or sell. When discussing NFTs and crypto collectibles, monetization and the ability to trade is really what most actors in the space are interested in, and what has helped fuel interest in the NFT ecosystem in recent years.

Where to Buy and Sell Crypto Collectibles?

Crypto collectibles, such as NFTs, can be purchased on digital exchanges and marketplaces. There are many out there, including OpenSea and Rarible, which allow users to make an account, attach their digital wallets, and start buying and selling NFTs. Users on many of these platforms can also create crypto collectibles or mint their own NFTs (read more about what NFT minting is, and how it works).

But usually, buying and selling collectibles is as simple as signing up for an account with a marketplace, funding that account, and then making trades.

5 Top-Selling Crypto Collectibles

There are thousands, if not millions of types of crypto collectibles and NFTs on the market. Here are some of the most expensive crypto collectibles:

1. EVERYDAYS: THE FIRST 5000 DAYS

The most expensive NFT or crypto collectible ever sold (so far) is a piece of digital artwork called “EVERYDAYS: THE FIRST 5000 DAYS” by the artist Mike Winkelmann (also known as “Beeple). The NFT sold for $69.3 million at auction by Christie’s in 2021, and is a collage of Beeple’s earlier work. It was purchased by an NFT investor named Metakovan.

2. Clock

It has a simple name, and it’s a simple NFT. “Clock” is an image that displays the number of days since Julian Assange, the founder of Wikileaks, was sent to prison. The NFT itself sold for $52.7 million in 2022. It was created by an artist named Pak, and the funds received from the NFT’s sale went toward Assange’s legal defense.

3. HUMAN ONE

“Beeple” strikes again — one of his other artworks, “HUMAN ONE” is more than just an NFT. It’s actually a physical sculpture that comes with an NFT, too. So, it’s a sort of hybrid traversing the physical and digital, and it sold for $29 million in 2021.

4. CryptoPunk #5822

CryptoPunk #5822 is a part of the CryptoPunk NFT series, and many have sold for high dollar amounts. This one, specifically, sold for $23.7 million in early 2022, and was purchased by Deepak Thapliyal, who is the CEO of a Chinese blockchain company. This particular CryptoPunk depicts an “alien” avatar, which is the rarest type in the whole collection.

5. CryptoPunk #7523

Yet another part of the CryptoPunk collection, CryptoPunk #7523 sold for $11.8 million in 2021. It was purchased by Shalon Meckenzie, who is most notable for being the largest shareholder in DraftKings (a sports betting company), who says he bought it because this CryptoPunk, like #5822, is of the rare “alien” type.

How Crypto Collectibles Are Valued

When buying and selling cryptocurrency, the value of different coins depends on a variety of market factors, including demand — but sometimes broader economic issues or challenges in the crypto space. It’s similar with crypto collectibles, but with a twist.

A number of different factors can play into the value of these digital asset. But owing to the fact that crypto collectibles are one-of-a-kind, collectors or investors may be willing to pay more to get them. As a result, their value can increase. If there are no bidders or potential buyers, their value falls.

Pros and Cons of Crypto Collectibles as Investments

As with any investment, crypto collectibles have their pros and cons. That’s important to note before you start buying and selling cryptocurrency.

Some of the pros include the fact that NFTs have a clear record of ownership and transaction data, they’re potentially a high-growth asset, and they can be used as a tool for diversification in an investor’s portfolio.

Some even offer additional perks, such as access to exclusive groups or events, or even have a physical element associated with them, such as Beeple’s “HUMAN ONE,” mentioned above.

But the potential cons are hard to ignore. Above all else, NFTs and numerous different types of cryptocurrency are speculative investments — they are highly volatile, and there are no guarantees that investors will see a return. Further, they can lack the liquidity that other assets have (such as stocks), and there’s a lack of historical data to research for investors.

And one other important thing to keep in mind is that the crypto ecosystem is still rife with scams and fraud. So, be careful before making any big-money moves.

The Takeaway

Crypto collectibles comprise NFTs and the entire world of non-fungible digital assets. They can be bought, sold, and otherwise traded on exchanges and digital marketplaces, and their values are largely determined by the overall market. In other words, a crypto collectible’s value can be as much or as little as someone is willing to pay for it.

If you’re interested in cryptocurrency — be it learning more about how cryptocurrency works or starting to invest in cryptocurrency — you can get a running start using SoFi Invest. Just open an Active Invest account and from there set up your crypto trading account. You can get started with as little as $10, and trade dozens of crypto 24/7.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Are crypto collectibles a type of NFT?

It’s more accurate to say that NFTs are a type of crypto collectible. In fact, they’re the main type — NFTs are digitized tokens of items that are then bought and sold in the cryptocurrency ecosystem, although they’re not cryptocurrencies themselves.

How much can crypto collectibles sell for?

Theoretically, there’s no limit to what a crypto collectible could sell for. Collectibles trade on the open market, and their value is thus determined by the market. They can sell for as much as an investor or collector is willing to pay for them. In some cases, crypto collectibles have fetched tens of millions of dollars.

Photo credit: iStock/AntonioSolano

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. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
²Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount		Bonus Payout
Low	High	Bonus Payout
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

SOIN0221033

Nov

2022

IPO vs Acquisition: Advantages and Disadvantages

By Paulina Likos | Growing Wealth, invest, Investing | Comments Off

An IPO is an initial public offering, when a company makes its shares available for public trading, and it’s quite different from an acquisition. IPOs are synonymous with entering a new market, while an acquisition is typically when a larger company takes over a smaller target company.

What does IPO mean vs. an acquisition? When a company applies for an IPO, it entering into the traditional process to be listed on a public exchange and get funding from individual investors. In an acquisition, or takeover, the target company may not survive — or it may thrive, but only as part of the newly combined organization.

Investors contemplating companies at these two different stages would do well to think through the benefits and risks.

How IPOs Work

When companies go public it’s when a private company decides to sell its shares to raise capital to fund growth opportunities for the company; create more awareness about the company; or to acquire other businesses, among many other possible reasons.

The IPO is the process of selling securities to the public. The company decides how many shares it wants to offer. The price of the company shares are determined by the company’s valuation and the number of shares at listing, and the funds raised by the IPO are considered IPO proceeds.

Once the IPO is approved, the company is then listed on a public stock exchange where investors can buy shares of the IPO stock.

Advantages of Going Public

What are the advantages of going public? There can be many, which is why companies aspire to go through this arduous process.

Capital for Investment

The biggest advantage associated with an IPO is fundraising. Once investors start buying IPO stocks, the proceeds from an IPO can be substantial. The company then takes this capital and typically uses it toward internal investments and expansion. The company can use the funds it raises for research and development, to hire more staff, or expand its operations in other states or countries. There are a variety of ways this new capital can be deployed to benefit the company.

Publicity

IPOs generate a lot of publicity. This, in turn, can drive more attention to the company and make investors interested in purchasing shares of its stock. IPOs are frequently covered in business news, which adds to the IPO buzz.

Valuation

Many companies that go public can end up having higher valuations. Because the public company has access to more capital and steadily grows its business, the shares of the company can increase in price over time.

Disadvantages of Going Public

What are the disadvantages of going public? There are a series of steps and regulations companies must adhere to in order to have a successful IPO — and the process can be time consuming and difficult.

High Cost

The first factor a company must consider is cost. The company needs to work with an investment bank, which will charge underwriting fees — one of the largest costs associated with an IPO.

Underwriting is mandatory to review the company’s business, management, and overall operations. Legal counsel is also required to help guide the company through the IPO. There are also costs associated with account and financial reporting. Companies will also accrue fees for applying to be listed on the exchange.

Not Enough Information for Investors

From an investor’s perspective, investing in an IPO can also be a challenge. In many cases, individual investors don’t have enough information or historical data on the company’s performance to make a determination on whether an IPO is a sound investment.

Stock Market Stress

Once a company goes public, it is now part of the public market. This means it is subject to scrutiny, market volatility, and investor sentiment. Every move and decision the company makes, such as a corporate restructuring, merger and acquisition, change in leadership, or release of earnings reports, will be reviewed closely by industry analysts and investors, who will provide their own opinions on whether the company is operating well or not.

While the company’s leadership may not have had to worry about these aspects when it was private, a public company needs to keep these market pressures top of mind.

What Is an Acquisition?

What does it mean for a company to be acquired? Similar to a merger, an acquisition is when one company buys a portion or the whole of another company and all its assets. An acquisition is the process of the acquiring company taking full control of the target company.

If the acquiring company takes more than 50% of the target firm’s shares, this gives the acquiring company control over decision making regarding the target company’s assets. While acquisitions of well-known and larger companies occur and are covered by the news, companies of any size can be the acquiring company or target company.

Advantages of Being Acquired

Being acquired doesn’t have to signal the end of a company — sometimes it can be a lifeline.

Growth

An acquisition can be a strategy for a company to grow into new markets and quickly become a leader in its industry. If the company is working in a competitive landscape, an acquisition helps increase its value and can add to a company gaining more market strength.

Innovation

When one company acquires another, this allows resources and experiences to come together. This may enable the new company to innovate new ideas and strategies that may eventually help grow the company’s earnings. This new partnership can bring together a new team of specialists and experts that can allow the company to develop and reach its goals.

More Capital

When an acquisition occurs, this will increase the cash holdings and assets of the acquiring company and usually allows for more investment in the newly formed company.

Opportunities With IPOs

Investing in IPOs can be a great opportunity for individual investors to get in at an early stage of a company’s growth. When you participate in an IPO, investors purchase shares at the stock’s offering price before it begins trading in the secondary market. Prior to investing in an IPO, it’s important to do your research to make sure you understand the risks of the investment.

Disadvantages of Being Acquired

It’s hard to avoid the negative implications of an acquisition, and investors need to consider these as well.

Conflicting Priorities

In some acquisition scenarios, there may be competing priorities between the two companies that come together. The acquiring company and target company prior to the acquisition were used to working as individual entities. Now, as a newly formed company, both sides must work together to be successful, which is easier said than done. If there isn’t alignment on the goals of the organization as a whole, then there is a possibility that the acquisition may fail, or the transition could be rocky and prolonged.

Pressure on Existing Partnerships

When an acquisition occurs, the newly formed company becomes bigger and it is likely that their goals will grow as well. In the case where the company wants to develop more products to expand into new markets, this could require their suppliers to figure out how they are going to ramp up production to meet the demand.

For example, this could mean the supplier would need more capital to hire staff or purchase additional equipment and supplies to prevent production issues.

Brand Risk

Depending on which companies come together, if one has a poor reputation in their industry, the acquisition could put the other company’s brand at risk. In this case, both of the companies’ identities could be evaluated to decide whether they come together under one brand or are marketed as separate brands.

The Takeaway

Initial public offerings (IPOs) and acquisitions often get a lot of media and investor attention because they can offer opportunities for investors. That said, these two events are quite different.

An IPO is when a private company decides to go public and sell its shares to individual investors, whereas an acquisition is when a company buys out another, target company. In this case the acquiring company may gain certain market advantages, and the target company will typically lose its decision-making privileges since it is no longer an individual company.

There are a number of pros and cons to IPOs, just as there are advantages and disadvantages of a company being acquired. IPOs can provide a newly minted public company with a lot of growth opportunities — but the IPO process is expensive and time consuming, and being beholden to regulators and investor sentiment is never a picnic.

Acquisitions can be a lifeline to a company that’s struggling in a competitive market. While the takeover can effectively eliminate the target company as an independent entity, its products or brand may continue to exist.

If you’re interested in setting up your own portfolio, and including IPO shares, you can open an Active Invest account with SoFi Invest and get started right away. Why wait? The market is full of opportunities, and once you know your priorities, you want to be able to take action.

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

FAQ

Is an acquisition an IPO?

An acquisition is not an IPO. An acquisition is when an acquiring company purchases part of or all of a target company to form one new company.

What is the difference between an IPO and a takeover?

An IPO is when a private company decides to go public and sell its shares to individual investors, whereas a takeover is when a company buys out another company.

Is a takeover an acquisition?

An acquisition can be a takeover. This is when two companies decide to come together and become one entity. All the assets of both companies are now part of a newly formed combined company.

Photo credit: iStock/Yuri_Arcurs

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

2022

4 Student Loan Repayment Options — and How to Choose the Right One for You

By Kayla McCormack | Debt Payoff, Financial Independence, Fresh Out of School, Student Loans, student_loan | No Comments

Editors Note: Since the writing of this article, the federal Student Loan Debt Relief program has been blocked and the Department of Justice has filed an appeal with the Supreme Court. While the case is being reviewed, the Biden administration is extending the federal student loan payment pause into 2023. The US Department of Education announced loan repayments may resume as late as 60 days after June 30, 2023.

Choosing a Student Loan Repayment Option

It’s never too early to think about student loan repayment. Whether you just started college, or you recently graduated and are still in the ‘grace period’ before repayment, strategizing now may help you find a student loan repayment plan that works for you before making you make a single payment.

If you’re graduated, working, and already making payments, it can be easy to overlook the other choices. But you can make changes to your student loan repayment plan even if you’re not in a financial crunch.

It’s also a good idea to re-evaluate your repayment plan over time. As your financial circumstances change, the way you want to manage your student loans may shift.

Before considering your options, take inventory of all your student loans. Be sure to list out the principal, the interest rate, the repayment period, and the servicer for each loan.

All federal student loans issued in recent years have fixed interest rates, but private student loans or older federal student loans may have variable rates. If the rate is variable, be sure to note that as well.

Different Student Loan Repayment Options

Once you understand your student loans, it’s time to think about your repayment options. The effortless choice is to do nothing and just pay your bills as they come.

Simply put, it means you pay back your student loan(s) under the interest rate and terms you agreed to when you initially signed the paperwork. For federal student loans, this is formally called the Standard Repayment Plan, and it typically means paying a fixed amount every month for up to 10 years.

There’s no “standard repayment plan” for private student loans; the interest rate may vary based on market factors, and your repayment term might be shorter or longer.

The federal government also offers graduated and extended repayment plans for borrowers. A graduated repayment plan means that the payment starts smaller and grows over time, while the extended repayment plan stretches repayment over a period of up to 25 years and payments may be either fixed or graduated.

There’s nothing wrong with opting for the Standard Repayment Plan — except that for some borrowers, it’s not the most cost-effective choice. Some borrowers may be able to find a more competitive interest rate by refinancing their loans through private lenders.

Others may be eligible for special federal programs that can reduce the amount owed monthly based on financial circumstances, and in some cases, forgive balances if you meet certain requirements.

Here’s an overview of repayment options that may help if you are choosing a repayment plan:

1. Student Loan Consolidation

Federal student loan consolidation allows you to combine multiple federal student loans into a single new loan. You can’t consolidate private student loans using this federal program.

When you consolidate your federal student loans into a Direct Consolidation Loan, it doesn’t necessarily reduce your overall interest rate.

Your new loan’s interest rate will be the weighted average of all the old student loans’ interest rates, rounded up to the nearest eighth of a percent. This means your interest rate might actually be slightly higher than the rate you were paying before consolidation on some of your student loans.

When you consolidate, you’ll also have the option to select a new repayment plan. The Standard plan would still be available, but consolidation can also be a first step toward other plans of action, like loan forgiveness or income-driven repayment.

2. Student Loan Forgiveness

Some federal student loans, and Direct Consolidation Loans, are eligible for modified payment plans that forgive outstanding student loan balances.

Health care professionals, teachers, military service members, and those employed full-time by qualifying nonprofit or public service organizations may be eligible for certain federal student loan forgiveness programs.

Some types of student loan forgiveness aren’t completely free, however. Federal student loan balances forgiven under income-driven repayment plans may be considered income by the IRS, meaning that you might need to pay taxes on that amount.

Those taxes might still be less than paying the forgiven principal amount, but it can be an unpleasant surprise at tax time if you’re not prepared.

One notable exception is the Public Service Loan Forgiveness (PSLF) program. After 10 years of payments on a qualified income-driven repayment plan, those who have worked for qualified employers, such as the government or some nonprofit agencies, can apply for forgiveness of all of their remaining federal student loan balances.

That forgiveness is not considered taxable income.

The Federal Student Aid website has additional information on which federal student loans qualify for which types of forgiveness, cancellation, and/or discharge.

3. Income-Based Repayment

If the payments under the Standard Repayment Plan seem too daunting, federal student loans offer a variety of income based repayment plans, which tie the amount you pay to the discretionary income you earn.

These income-driven repayment plans come in a variety of flavors and configurations, but an important takeaway is that, in some cases, you may end up paying more over the life of the loan than you would have on the Standard Repayment Plan. That’s because, with low monthly payments that stretch out over more years, you could be paying more in interest over time.

Fortunately, new federal regulations will curtail interest accrual in many situations. For instance, if your balance is high, your lower, income-adjusted monthly payments may not cover the interest that accompanies the principal (the set amount of money you’re given when you take out the loan). So rather than shrinking, student loan balances used to grow over time as unpaid interest accumulated.

However, beginning in July 2023, this excess interest will no longer accrue, saving borrowers money. Another upside is that if your job situation is less defined and you know you’ll need to tap the reduced payment rates these plans provide, choosing an income-driven repayment plan makes that possible.

Additionally, you’re still able to qualify for some student loan forgiveness programs if the rest of your student loans aren’t paid off after 20 to 25 years of consistent, on-time payments. However, again, it’s worth keeping in mind that you might be on the hook to pay income taxes on the remaining loan amount that is forgiven, depending on the repayment plan you qualify for.

4. Student Loan Refinancing

Refinancing student loans through a private lender offers the opportunity to consolidate multiple student loans into a single payment and potentially decrease your interest rate.

Loan repayment terms vary based on the lender, and terms and interest rates are often more favorable for those with better credit and earning potential (among other financial factors that vary by lender).

For potential borrowers with an interest in saving money over the life of their student loan, refinancing can provide overall value by offering market interest rates.

One important thing to know about refinancing, however, is that once you refinance a federal student loan into a private loan, you can’t undo that transaction and later consolidate back into a federal Direct Consolidation Loan.

This can be relevant for professionals in health care or education where federal student loan forgiveness plans are offered, or for those considering long-term employment in the public sector.

Further, refinancing federal student loans with a private lender renders them ineligible for important borrower benefits and protections, like income-driven repayment and deferment.

Can You Change Your Student Loan Repayment Plan?

If you have federal student loans, it is possible to change your repayment plan at any time, without any fees. You’ll have the option to choose from any of the federal repayment plan options, including income-driven repayment plans.

There is less flexibility to change the terms of a private student loan. Some private lenders may offer alternative payment plans for borrowers. Check with your lender directly to see what options may be available to you.

SoFi Student Loan Refinancing

Refinancing is another avenue that can result in a new repayment plan. An important consideration, refinancing federal student loans will remove them from any federal programs or protections, so this won’t be the right choice for everyone.

If you’re considering refinancing, take a look at SoFi. Potential borrowers can find out what rates they pre-qualify for in just a few minutes and there are no fees, including origination fees or application fees.

The Takeaway

Federal student loan borrowers have the ability to change their repayment plan at any time, without being charged any fees. And new federal regulations that will curtail interest make the plans a better deal for borrowers. Changing your repayment plan is a bit more challenging for private student loans, though some private lenders may offer alternative options for borrowers. Refinancing is another option that can allow borrowers to adjust their repayment terms.

SoFi offers refinancing loans that are free of any fees and potential borrowers can apply entirely online.

Which student loan repayment plan makes the most sense for you? Consider refinancing with SoFi as an option that could potentially save you money.

FAQ

What student loan repayment options are available to me?

Borrowers with federal student loans can choose from any of the federal repayment plans, including the standard 10-year repayment plan, or income-driven repayment options. For private student loans, repayment options will be determined by the lender.

What is a standard repayment plan for student loans?

The standard repayment plan for federal student loans is fixed monthly payments over a period of 10 years. For consolidation loans, repayment may extend up to 30 years.

How long is a typical student loan repayment?

The typical student loan repayment period may vary from individual to individual. The standard repayment plan for federal loans is 10 years, but income-driven repayment plans or Direct Consolidation loans may have a longer term.

The repayment terms for private student loans vary by lender.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

CLICK HERE for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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.
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.
SLR17109

Nov

2022

7 Common Moving Costs to Know Before You Pack Up

By Maureen Shelly | Budgeting & Goals, Debt Payoff, personal_loan | No Comments

About 28 million Americans made a move in 2021, with about 5 million moving interstate. As you’re probably painfully aware, a move can cost several thousand dollars, whether you’re going across town or cross-country. Amid the chaos of purging and packing, it’s easy to forget some of the moving-related costs you might face.

The key to paying for a move without a load of stress is planning. We’ve drawn up a Moving Expenses Checklist that aims to include every little thing that needs to be accounted for in your budget, from supplies to cleaning to a new driver’s license and car registration.

Your Moving Expenses Checklist

Like a lot of things in life, moving costs aren’t entirely predictable. Much depends on how far you’re going, whether you’re crossing state lines, how much stuff you have, and so on. Our aim is to cover the basics — truck, strong movers — as well as the costs that sneak up on you midway. Keep on reading to find out what they are.

1. Moving Your Stuff

There are at least three different ways to get your stuff from one place to another: Rent a moving truck, pay professional movers, or rent and move a storage container.

Renting your own truck. Yes, this is usually the cheapest route. The downside is that you — and possibly your friends — will be putting in many hours of hard labor.

At first glance, renting a moving truck or van for an across-town move seems like a great deal. You may be familiar with companies advertising van rentals for $19.99. Except that figure doesn’t include gas, tolls, parking, damage protection, and cost per mile. Suddenly, that $20 becomes more like $100.

If you enlist friends and family to help, factor in the price of pizza, beer, or gift cards to lure them to your aid and keep them motivated. Also, long-distance moves may involve shipping some boxes, which adds up quickly.

Hiring pros. Get estimates from a few companies to make sure you’re getting a good deal. A local move is usually considered under 100 miles. A long-distance move is anything more than 100 miles. Expect to pay $800-$2,500 for a basic local move with two movers, and $2,200-$5,700 for a long-distance move.

The price of a local move is often based on an hourly rate; some companies may offer a flat rate. In some states, if you’re moving more than 50 miles, the cost may be based on the weight of the truckload instead of the hourly rate.

A packing service can add a chunk to these costs. You may also want to purchase “full value protection” insurance through your mover to protect your belongings in case of loss or damage.

Hauling a container. Moving a self-storage container, those units popularized by PODS®, is typically less expensive than using full-service movers. Three factors influence your cost: the size of your home, the distance you’re moving, and seasonality. A local container move can range from $1,100 to $1,600, including the container and transport. A 1,000 mile move costs on average $4,430 for the contents of an average-size home. Prices tend to be higher during “moving season,” typically March through August.

If you’re comparing quotes, know that each company handles costs differently. Some itemize the costs for each part of the move; others include everything in one quote.

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2. Transporting Yourself

Short or long move, you’ll have to get yourself there, too. That could mean a road trip, which includes gas, tolls, possibly lodging, and meals along the way. An online fuel cost calculator can help you tally how much you’ll spend on gas. Otherwise, it means the cost of a plane ticket, getting yourself to and from the airport, and possibly the price of shipping your car.

3. Moving Supplies

You probably know that you’ll need boxes. But don’t forget the oodles of tape, bubble wrap, packing peanuts, labels, and protective blankets for furniture. And you’ll need to rent or buy a dolly if you’re planning a DIY move.

You may be able to save by asking for free boxes from local grocery stores and using recycled newspaper as packing material. But the little things can still add up.

4. Costs Upon Arrival

If you’re renting, you might owe a security deposit and first month’s rent to your new landlord. You may also be responsible for a pet deposit or fees for getting utilities hooked up.

If you’re moving into a home of your own, you might need to make repairs before you settle in. Some new homeowners also invest in changing locks, putting in security alarms, or replacing smoke detectors.

You may also want to take care of renovating some areas before all your stuff is in the way, and if you have a lawn for the first time, you might need to buy a mower or hire a service.

Will you need a storage unit? Plan on $100 to $300 a month.

5. Cleaning Costs and Supplies

You might be responsible for leaving your old place in tip-top shape. That means paying for stuff like floor cleaner, mops, brushes, and wipes. You may also need to hire a carpet cleaner or house cleaners if you’re short on time or your place needs serious attention.

On the other end, you might need supplies to clean your new apartment or house before you unpack everything.

6. Furniture and Other Items

Even if you’re bringing a lot of things with you, chances are you’ll need to buy some furniture for your new home. You might save by searching online or perusing garage sales and flea markets.

Still, if you need any substantial pieces, like a bed, couch, or table, you could be looking at a few hundred dollars. Beyond furniture, if you’ve moved far away, you might need to stock your new place with all kinds of everyday items, from groceries and pantry staples to toiletries.

7. New License and Vehicle Registration

If you’re moving to a different state and have a car, you’ll need to apply for a new license and register your car with the local department of motor vehicles. This comes with a fee, of course. Vehicle registration can cost up to $225, depending on the state. A new driver’s license can cost around $30 to $60.

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Preparing for Moving Costs

When making a moving-cost checklist, the worst budgeting mistake you can make is underestimate your needs because you’re not sure how you’ll pay for them. If anything, you want to pad your budget so that unexpected costs don’t make the experience harder than it has to be.

If you’ve got the cash to cover your move, great. That’s what emergency savings are for. You can also use a 0% interest credit card, crowdsource from friends and family, or consider a personal loan.

Personal loans are a form of installment debt, where you receive a lump sum that you then repay in equal monthly payments. There are different types of personal loans, so you can choose the terms that best fit your budget and circumstances.

Believe it or not, moving expenses are one of the most common uses for personal loans. And because of their relatively low fixed rates compared to high-interest credit cards, you can roll in related new-home expenses like new furniture and painting.

The Takeaway

Moving is a major financial commitment, but it doesn’t have to break the bank. When planning a move, first decide whether you’re going to DIY or hire pros. Then make a list of packing supplies, cleaning supplies and services, and the cost of moving yourself if it’s long-distance. Next, consider your costs upon arrival: security deposit, prepping your new space, replacement furniture, and new household items. If you’re moving interstate, there may be car-related expenses, such as a new license and registration. And it’s always wise to pad your budget — 10%-20% — to accommodate anything unexpected.

Planning a move and need money to help? A SoFi personal loan can be a smart way to cover your costs without adding emotional baggage. Apply for $5K-$100K, and pay no origination fees, prepayment fees, or shady hidden fees. Our personal loan calculator can help you choose the terms that are right for you.

Get a move on to see what a personal loan can do for you.

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