Jun
28
2022
How to Invest in Solar Energy

How to Invest in Solar Energy

By | Growing Wealth, invest, Investing | Comments Off on How to Invest in Solar Energy

Solar energy investing focuses on companies or funds focused on some aspect of the solar energy industry. Individuals can invest in the solar energy industry by putting money into companies involved in some part of the solar power supply chain, including manufacturers of solar panels and operators of solar energy facilities. Individuals can also profit from solar energy by installing solar panels on their homes.

Solar energy is one of the most promising renewable energy sources. There are several ways to invest in solar energy for investors interested in supporting an industry that may help reduce dependence on traditional fossil fuels and help combat climate change.

What Is Solar Investing?

Solar investing generally refers to investing in companies that produce or sell solar energy products. This can include solar panel manufacturers, installers, or companies operating solar energy facilities. Investors usually invest in solar through traditional products like stocks, mutual funds, and exchange-traded funds (ETFs).

Another common type of solar investing is the installation of solar panels on a home or business. Solar panels can be used to power all or part of a home or business, and the electricity generated can offset the cost of an energy bill. Investors can also use solar panels to generate income by selling their electricity back to a utility company.

💡 Recommended: Beginner’s Guide to Sustainable Investing

What Is Solar Energy?

Solar energy is a form of renewable energy that comes from the sun; it is an abundant source of energy that can be used to generate electricity, heat water, and provide other forms of energy for homes, businesses, and communities.

Solar energy is generally generated by solar panels, which are made up of photovoltaic (PV) cells that convert sunlight into electricity. Solar panels can be installed on an individual’s home or business or arrayed across open spaces that experience strong sunlight.

Though solar panels are common for most consumer and business applications, thermal solar is another type of solar energy. Thermal solar energy utilizes mirrors to reflect and concentrate sunlight onto receivers that collect the energy and convert it to heat, which can then be used to produce electricity or stored for later use. It is used primarily in large power plants.

Solar energy is considered a clean and sustainable energy source that can help reduce the dependence on fossil fuels to combat climate change. Analysts expect renewable energy sources like solar will make up a more significant portion of all energy generation in the coming decades.

Benefits and Risks of Investing in Solar

The trend of investing in renewable energy sources like solar energy is rising as the public becomes more aware of the environmental and economic benefits. However, before investing in this sector, there are benefits and risks to consider.

Benefits

A benefit of investing in solar is that it provides a renewable energy source that can help reduce your carbon footprint. This can be appealing to investors interested in environmentally friendly and socially responsible investing.

Solar energy is also sustainable, especially compared to fossil fuels and traditional energy sources. The amount of oil and coal in the ground is limited, but the sun will likely keep shining for many more years. Investors interested in investments with long-term growth potential may prefer solar energy to other energy stocks.

Additionally, if you install solar panels on your home, it can increase the value of your property.

Risks

A primary risk of solar energy is that it is intermittent, meaning that solar energy is only generated when the sun is shining. Solar energy is only available during daylight, and a cloudy day may interfere with energy production. While this is a problem, technology is advancing so solar energy can be more adequately captured and stored during periods of extreme sunshine.

Another downside to solar energy is that many technologies in the sector require rare earth materials in the production process. The solar industry must compete with other industries for these scarce resources. Because there can be supply and demand issues for these commodities, it can increase costs for solar energy producers.

And though solar energy is a renewable resource, that doesn’t mean it doesn’t create any harm to the environment. The materials used in solar technologies are difficult to dispose of and recycle, which cuts into the sustainability claims of solar energy investments.

💡 Recommended: What Every New Investor Should Know About Risk

4 Ways to Invest in Solar Energy

Investors can invest in solar energy by putting money into the stocks and bonds of companies in the solar energy industry. Mutual funds and exchange-traded funds (ETFs) with solar energy or renewable energy-focused strategies are also potential investment vehicles for those interested in adding solar energy to their portfolio.

Regardless of the type of investment vehicle, investors need to remember that many companies and funds are diversified, meaning they may be involved in sectors other than solar energy. For investors that want to invest in purely solar energy companies or funds, it’s essential to do research into potential investments.

Stocks

Investors can put money into various publicly-traded companies involved in some aspect of the solar energy industry. Solar energy companies may include manufacturers of components for solar technologies, installers of solar panels, and firms that operate solar energy facilities.

Some companies involved in the solar energy industry include:

•   Enphase Energy (ENPH): This company designs and manufactures technologies that turn sunlight into energy

•   SolarEdge Technologies (SEDG): This firm creates products that help photovoltaic systems convert solar energy into power

•   First Solar (FSLR): This company is a manufacturer of solar panels and a provider of utility-scale photovoltaic power plants

•   Sunrun (RUN): This firm is a leading provider of residential solar panels

•   Daqo New Energy (DQ): This company manufactures monocrystalline silicon and polysilicon, primarily for use in solar photovoltaic systems

💡 Recommended: How to Analyze a Stock

Mutual Funds and ETFs

Investors who don’t want to pick individual stocks to invest in can always look to mutual funds and exchange-traded funds (ETFs) that provide exposure to solar energy companies and investments. A growing number of index funds invest in a basket of companies in the solar energy industry. These funds allow investors to diversify their holdings by investing in one security. However, not all solar energy funds follow the same criteria and may focus on different aspects of solar energy. These funds may also have holdings in traditional energy and utility companies that only are partially involved in the solar energy industry.

Bonds

The bonds of corporations involved in solar energy business practices can be a good option for investors interested in fixed-income securities. Green and climate bonds are bonds issued by companies to finance various environmentally-friendly projects and business operations.

Additionally, government bonds used to fund solar energy projects can be an option for fixed-income investors. These bonds may come with tax incentives, making them a more attractive investment than traditional bonds.

💡 Recommended: How to Buy Bonds: A Guide for Beginners

Install Solar Panels

As mentioned above, investors who want to profit from solar energy can purchase solar panels and install them on a home or business. This may be an appealing way to save money on your energy bills, generate income by selling electricity to a utility company and helping reduce your carbon footprint.

💡 Recommended: Solar Panel Financing in 4 Ways

How to Start a Solar Investment Portfolio

If you are ready to start investing and want to build a portfolio of solar energy investments, you can follow these steps:

Step 1: Open a brokerage account

You will need to open a brokerage account and deposit money into it. Once your account is funded, you can buy and sell stocks and other securities. SoFi Invest® offers an active investing platform where you can start building your solar energy portfolio.

Step 2: Pick your assets

Decide what type of investment you want, whether in a company’s stock, a solar energy-focused ETF or mutual fund, or bonds.

Step 3: Do your research

It’s important to research the different companies and funds and find a diversified selection that fits your desires and priorities.

Step 4: Invest

Once you’re ready, make your investment and then monitor your portfolio to ensure that the assets in your portfolio have a positive environmental and financial impact.

It is important to remember that you should diversify your portfolio by investing in various asset classes. Diversification may help to reduce your risk and maximize your returns.

The Takeaway

Solar investing has become increasingly popular in recent years as the cost of solar panels has fallen and the technology has become more efficient. Solar panels are now available for a fraction of the cost of traditional electric power, and they are becoming more efficient at converting sunlight into electricity. Investing in the solar energy industry can be a great way to profit from the growth outlook for solar energy. However, it’s necessary to do your homework before investing in any solar company or fund or installing solar panels on your home.

If you’re ready to invest in solar energy stocks and ETFs, SoFi Invest can help. With SoFi Invest’s stock trading platform, investors can trade stocks and ETFs with no commissions for as little as $5.

Get started investing with SoFi Invest

Photo credit: iStock/deepblue4you

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit 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.

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.

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Jun
28
2022

Guide to Student Loan Servicers

By | Debt Payoff, Student Loans, student_loan | No Comments

Do you know who oversees your student loans? If you’ve taken out loans from a variety of lenders, it can be hard to keep track. But it’s important to know who your student loan servicers and/or lenders are so you can make payments on time and reach out with any questions.

You’ll also want to contact your loan servicer or lender if you’re having trouble paying back your loan to discuss your options. Falling behind on payments or defaulting on a loan can have serious financial consequences. Here’s what to know about the different types of student loan servicers and lenders—and how to identify your own.

What Is a Student Loan Lender?

A lender is any individual or institution that loans money to someone and expects it to be paid back, usually with interest. In the case of private student loans, your lender is typically a bank or other financial institution.

When it comes to federal student loan providers, your lender is the federal government. But while you’re borrowing funds from the government, several different companies—called loan servicers—handle the administration of the loan and collect payments.

What Are Student Loan Servicers?

The federal government contracts with student loan servicers to take care of billing borrowers, setting up repayment plans, handling loan consolidation, and administering other tasks related to federal student loans.

The government currently works with nine different loan servicers to handle Direct Loans and Federal Family Education Loans (FFEL). If you’ve ever wondered, “who is my student loan servicer?” it’s likely one of the following companies:

•  FedLoan Servicing (PHEAA)

•  Great Lakes Educational Loan Services, Inc.

•  Edfinancial (HESC)

•  MOHELA

•  Aidvantage

•  Nelnet

•  OSLA Servicing

•  ECSI

•  Default Resolution Group

What Do Student Loan Servicers Do?

Loan servicers are the main point of contact for the administration of your loan. Here are some of the main functions of federal student loan servicers:

Collect Payments

The U.S. Department of Education assigns your loan to a loan servicer after it’s disbursed. As mentioned, your student loan servicer handles the billing and customer service for your student loans.

For federal loans, you can reach out to your loan servicer to confirm your balance and interest rate, or check your monthly payment. It’s helpful to register on the loan servicer’s site so you can stay on top of payments and understand what you owe. If you have any questions, it’s worth reaching out to ask.

In some cases, the department may decide to transfer your loans from one loan servicer to another. If this happens, you’ll receive a letter from the new servicer that will include the company’s contact information.

Execute Deferment or Forbearance Requests

If you run into financial hardship, contact your loan servicer to discuss options, such as applying for deferment or forbearance. One of the worst things to do is avoid contacting your lender or loan servicer because you’re embarrassed, confused, or overwhelmed.

These institutions are designed to help you understand your loan and pay it off according to schedule, and that means explaining things you don’t understand or working with you to come up with a more affordable repayment plan.

Handle Repayment Plan Changes

Loan servicers can help you figure out the best repayment plan for you and whether to consolidate your student loans. Federal borrowers can change their repayment plan at any time without any fees.

For example, if you’re hoping to lower your monthly student loan payment, you can extend your loan term. You’ll pay more in interest over the life of the loan, but it’s one way to get relief if you’re struggling to make payments.

On the flip side, you can shorten your loan term if you’d like to pay off your loan sooner. There are also income-driven repayment plans that tie the amount of a borrower’s income to their monthly payments.

Help Process Loan Consolidation Requests

If you’re looking to simplify your payments, your loan servicer can help you consolidate your federal loans through the Direct Loan Program, combining different federal loans into a single new loan with an interest rate that’s a weighted average of all of your existing federal loan rates. Keep in mind you’ll pay more interest over the life of the loan due to the rate change.

Your loan servicer can also help you determine if you’re eligible for Public Service Loan Forgiveness or other types of federal loan forgiveness and help you find out if you’re on the right repayment plan to qualify.

Looking to simplify your student loans? Learn more
about refinancing your student loans with SoFi.

How To Find Your Student Loan Servicer or Lender

Finding your student loan servicer can vary depending on the types of student loans that you have. Here are some of the most common ones:

Private Student Loans

There generally aren’t private student loan servicers; your main point of contact is your lender. You can find contact information for your private student loan lender on the emails or billing statements you should be receiving each month once you enter repayment.

Some private lenders also send a welcome packet or call you once you begin repayment. You can also look for their contact details on the documents you received when you first took out the loan, such as a promissory note.

If you’ve completely lost sight of your private student loan lender, you can confirm who they are by checking your credit report. You can request one free credit report annually from each of the three major credit reporting agencies—Equifax, Experian, and TransUnion. The financial aid office at your school may also be able to help you track down your lender.

Federal Student Loan Lenders

For federal student loans, you can log in to the Federal Student Aid site in order to confirm the name of your loan servicers and retrieve their contact information.

Another option is to check the National Student Loan Data System (NSLDS). This Department of Education database is a centralized repository of information about your student loans, aggregating data from universities, federal loan programs, and more.

Federal Perkins Loans

For federal student loans outside of the Direct Loan and FFEL programs, you can find out information about your loan servicer in other ways.

For a Federal Perkins Loan, contact the school that issued it, which may also be your loan servicer. If your Federal Perkins Loan has been transferred to the Department of Education, contact the ECSI Federal Perkins Loan Servicer at 1-866-313-3797.

If you have a FFEL Program loan owned by a private lender and not the Department of Education, you can find the lender’s details on your credit report as well.

Contacting Your Lender or Loan Servicer

Most lenders and loan servicers make it easy for you to contact them. They want you to be able to get in touch easily to make sure repayment goes as smoothly as possible. You can find phone numbers and website URLs for the nine federal loan servicers on the Department of Education site.

Loan servicers are generally available by phone, mail, and email, and some are also accessible through live online chat. You can find contact information for a private lender by searching online or reviewing mail or email correspondence they have sent you.

Why Might You Need to Contact Your Student Loan Servicer?

As mentioned earlier, you can reach out to your federal loan servicer for payment questions or issues or to adjust your payment plan. You can also apply for deferment or forbearance or look into forgiveness options.

Ignoring payment problems, or neglecting your student loans, can backfire in the long term. If your student loans become delinquent or you default on your student loans, there can be serious financial repercussions, including the unpaid balance of the loan being due immediately.

If you’re having trouble making payments, contact your loan servicer to find out payment options that may be available to you.

Don’t try to reach out to a loan servicer for questions about the status of your loan application or disbursement amounts and timelines—those are queries best left to your financial aid office since they are the ones responsible for ultimately disbursing your loan.

The same goes for questions about the Free Application for Federal Student Aid (FAFSA®) should be directed to the Federal Student Aid Information Center (1-800-4-FED-AID).

Recommended: FAFSA Guide

The Takeaway

While you may borrow money from the federal government, student loan servicers—private companies that work with the Department of Education—oversee the administration of your loan. They collect payments, handle applications for deferment or forbearance, assist with repayment plan changes, and offer customer service and general assistance. When you have a private student loan, the lender generally oversees the administration of the loan.

If you have any questions about your loan or if you’re having trouble making payments on your loan, you should reach out as soon as possible to your student loan servicer or lender. They may be able to help you find solutions that will prevent you from defaulting on your loan.

Wondering if your student loans are with the lender or servicer that’s right for you? Learn more about refinancing your student loans with SoFi.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


SoFi Loan Products
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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Jun
28
2022
How to Invest in Wind Energy

How to Invest in Wind Energy

By | Growing Wealth, invest, Investing | Comments Off on How to Invest in Wind Energy

Investing in wind energy involves putting money into companies or funds focused on some aspect of the wind energy industry. Individuals can invest in the wind energy industry directly by investing in companies that operate wind farms or indirectly by putting money into companies that manufacture wind turbines or components.

Wind energy is one of the cornerstones of the renewable energy industry, providing a stable and cost-effective source of electricity generation. As more attention is paid to the effects of climate change and the need to reduce dependence on fossil fuels, more and more investors are turning to wind energy investments.

What Are Wind Energy Investments?

Wind energy investments are financial stakes in companies and projects focused on generating electricity through wind power. Wind turbines, sometimes called windmills, harness this power by collecting the energy created by wind and converting it into electricity.

Wind energy is often divided into two market segments, distributed wind and utility-scale wind.

Distributed Wind Market Segment

The distributed wind market is usually made up of smaller-scale projects, where wind turbines are used to generate electricity for homes, businesses, and even entire communities.

Utility-scale Market Segment

Utility-scale wind energy, in contrast, consists of turbines that generate more than 100 kilowatts of energy. The power generated by utility-scale wind projects is added to the electrical grid. Companies involved in utility-scale wind energy draw the most interest from individual investors.

Utility-scale wind energy projects can be land-based, where a group of wind turbines is grouped in a wind farm on land. Offshore wind farms built off the coast are another type of utility-scale wind energy, taking advantage of powerful ocean winds to generate large amounts of energy.

Individuals can invest in the wind energy industry by putting money into companies involved in some portion of the wind energy industry or, more rarely, by investing in specific wind energy projects.

Increased Popularity

Wind energy investments, and other socially responsible investments, are becoming increasingly popular as the focus on the need for sustainable energy grows. Because they rely on wind power rather than fossil fuels, these investments and projects cut down on emissions and pollution.

Furthermore, wind energy is becoming more acceptable because of declining costs, technological improvements, and government tax incentives. In the United States, wind power was the source of 9.2% of all electricity generation in 2021, up from 2.3% in 2010. By 2050, wind energy may make up 35% of all electricity generation in the US.

3 Ways to Invest in Wind Energy

Investors can invest in wind energy by putting money into the stocks and bonds of companies in the wind energy industry. Mutual funds and exchange-traded funds (ETFs) with wind energy or renewable energy-focused strategies are also potential investment vehicles for those interested in adding wind energy to their portfolio.

Regardless of the type of investment, investors need to remember that many companies and funds are diversified, meaning that they may be involved in sectors other than wind energy. For investors that want to invest in purely wind energy companies or funds, it’s essential to do research into potential investments.

💡 Recommended: Beginner’s Guide to Sustainable Investing

1. Stocks

Investors can put money into various publicly-traded companies involved in some aspect of the wind energy industry. These companies may include wind farm operators, which own and operate wind turbines to produce energy for customers and end-users, and manufacturers of turbines and other components of wind farms. Some utility companies may also be an option for wind energy investors.

Some companies involved in the wind energy industry include:

•   Orsted: The Denmark-based power company is the largest developer of offshore wind power in the world

•   Vestas Wind Systems: The Denmark-based company is one of the world’s largest manufacturers of wind turbines

•   General Electric (GE): The US-based company installed 53% of all land-based wind turbines in the US in 2020

•   NextEra Energy (NEE): The American energy company has 119 wind farms in operation

•   Alliant Energy (LNT): The American energy company owns and operates wind farms across Wisconsin and Iowa

💡 Recommended: How to Analyze a Stock

2. Mutual Funds and ETFs

Investors who don’t want to pick individual stocks to invest in can always look to mutual funds and exchange-traded funds (ETFs) that provide exposure to wind energy companies and investments. A growing number of index funds invest in a basket of companies involved in the wind energy industry. These funds allow investors to diversify their holdings by investing in one security. However, not all wind energy funds follow the same criteria and may focus on different aspects of wind energy. These funds may also have holdings in traditional energy and utility companies that only are partially involved in the wind energy industry.

3. Bonds

The bonds of corporations involved in wind energy business practices can be a good option for investors interested in fixed-income securities. Green and climate bonds are bonds issued by companies to finance various environmentally-friendly projects and business operations.

Additionally, government bonds used to fund wind energy projects can be an option for fixed-income investors. These bonds may come with tax incentives, making them a more attractive investment than traditional bonds.

💡 Recommended: How to Buy Bonds: A Guide for Beginners

Benefits and Risks of Investing in Wind Energy

The trend of investing in renewable energy sources like wind energy is rising as the public becomes more aware of the environmental and economic benefits of doing so. However, before investing in this sector, there are benefits and risks to consider.

Benefits

A benefit of investing in wind energy is that it is a renewable resource, so it will never run out as long as the sun shines and the wind blows. Additionally, wind energy is cost-effective. According to some estimates, wind is one of the lowest-priced energy sources. And because the power generated from wind farms is sold at a fixed price over a long period of time, it can provide reliable returns for investors.

Wind power is also a clean energy source, meaning it does not produce emissions that can harm the environment like fossil fuels and power plants. This can be attractive for investors focused on building a portfolio of green investments.

Risks

One primary risk of investing in wind energy is that it is a relatively new technology, so there is little data available on its long-term performance. Wind energy and all renewable energy sources must compete with traditional energy sources like oil, coal, and natural gas. Because of this, the long-term outlook for wind energy investments may change. Wind energy investments may be harder to stomach for investors who are not comfortable with the risk of newer technologies.

Additionally, wind energy projects may get pushback from communities where companies want to operate. Wind turbines cause noise and aesthetic pollution, potentially creating negative public perception.

How to Build a Wind Energy Portfolio

If you are ready to start investing and want to build a portfolio of wind energy investments, you can follow these steps:

Step 1: Open a brokerage account

You will need to open a brokerage account and deposit money into it. Once your account is funded, you can buy and sell stocks and other securities. SoFi Invest® offers a stock trading platform where you can start building your wind energy portfolio.

Step 2: Pick your assets

Decide what type of investment you want to make, whether in a company’s stock, a wind energy-focused ETF or mutual fund, or bonds.

Step 3: Do your research

It’s important to research the different companies and funds and find a diversified selection that fits your desires and priorities.

Step 4: Invest

Once you’re ready, make your investment and then monitor your portfolio to ensure that the assets in your portfolio have a positive social and financial impact.

It is important to remember that you should diversify your portfolio by investing in various asset classes. Diversification may help to reduce your risk and maximize your returns.

The Takeaway

Wind energy is a renewable resource that is becoming increasingly popular and is expected to grow significantly in the coming years. This makes it a potential growth investment for those looking to diversify their portfolios and reduce their reliance on traditional energy sources.

While the outlook for wind energy is promising, investments in wind energy may not always produce positive returns. When considering a wind energy investment, it is important to do your research and understand the risks and rewards involved with this nascent industry.

If you’re ready to invest in wind energy stocks and ETFs, SoFi Invest® can help. With a SoFi Invest investment account, you can trade stocks and ETFs with no commissions.

Get started investing with SoFi Invest

Photo credit: iStock/XtockImages

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit 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.

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.

SOIN0622006

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Jun
28
2022
women walking on beach

The Best Investment Strategies for Each Generation

By | Growing Wealth, invest, Investing, Life & Career | No Comments

The global economy and financial markets have changed dramatically during the past decades. Each generation has faced unique financial circumstances, including a Wall Street boom in the 80s, robust economic growth in the 90s, the Great Recession, and the Covid-19 fallout. So it’s not surprising that different generations could have widely different money habits and views on investing.

That doesn’t even include the differing needs for someone in their 70s and enjoying retirement compared to someone who has just graduated from high school. Given these vastly different experiences and ages, there are various investment strategies best suited for each generation that may help them meet financial goals.

Strategies for Baby Boomers

Baby boomers – those born between 1946 and 1964 – are likely finished or almost done paying off their homes and in the middle of or looking toward retirement. That means their financial goals are changing. Baby boomers must learn how to budget their expenses without regular labor income while still planning to spend for travel, health care, and other things.

A 2020 survey by Charles Schwab found that baby boomers had saved $920,400 in retirement savings, and 82% believed their savings will get them “all the way” or “most of the way” to living out their dream retirement.

Still, a 2022 study by Fidelity found the average couple will need $315,000 in medical expenses in retirement, excluding long-term care, representing a potential gap in their savings plan.

Here are some investing strategies baby boomers can use to save for retirement:

Strategy 1: Keep Cash on Hand

It’s crucial to still stash away a few bucks for unexpected expenses, such as health care costs. Health care has continually been one of the largest expenses in retirement. So keep squirreling away a little bit of your remaining income into an emergency fund.

Strategy 2: Stay Invested Until Retirement

Like all age demographics, baby boomers should still live by the idea that they’re in it for the long haul. Get and stay invested in the market via a 401(k), IRA, or other investment account, and do not touch these accounts before retirement age — which is 64 in the U.S., on average.

💡 Recommended: When Can I Retire?

Strategy 3: Continue to Diversify

Baby boomers should continue to diversify their portfolios as they near retirement. However, experts generally recommend shifting your portfolio’s asset allocation at this stage in life, moving toward a conservative investment strategy focused on fixed-income securities and blue-chip stocks.

And once you retire, it doesn’t mean it’s time to pull all your money out of the markets and live with the cash on hand. There are several investment options for retirees, including a portfolio of income-producing assets like bonds and dividend-paying stocks.

💡 Recommended: 5 Investment Tips for Retirees

Strategies for Gen Xers

Meanwhile, Generation X – or those born between 1965 and 1980 – feel much less rosy about their financial future. A 2021 report by Bank of America found that 94% of Gen Xers said they feel stress when thinking about their financial situation

It could have to do with their place in life. Unlike boomers, Gen Xers may still face student debt and mortgage payments. Additionally, this generation faces more hurdles, like child caregiving and employment challenges. With all this financial stress, here are some investing tips for Gen Xers:

Strategy 1: Consider Your Financial Goals

To help build a savings nest egg, many Gen Xers use what is known as managed portfolios of investments, which are personalized and tailored investments made for the specific needs of the individual account holder.

And this targeted approach may be crucial for this middle-of-the-road age demographic as they are finally earning more. However, Gen Xers also need to save for retirement and college for their children and pay off mortgages on their recently purchased homes.

Strategy 2: Get Financial Advice

For Gen Xers, who haven’t done much in terms of investing, it’s never too late to start. Seeking help from financial advisors and other professionals can help you set short-term and long-term financial goals.

Strategy 3: Take on Some Risk

For professionals in their 40s, their money likely has another 20-plus years in the market before retirement. They still have time to make up for any potential losses, so it may not hurt to put a little on the line in exchange for a bigger win down the road. So, Gen Xers can still factor some risk into their portfolio’s asset allocations, including investing more heavily in stocks and other risky securities. However, it’s best never to risk more money than you can afford to lose.

Investment Strategies for Millennials and Gen Z

Millennials – those born between 1981 and 1996 – lived through the severe economic downturn of the Great Recession and faced some of the highest unemployment rates in history. So, it’s no wonder they have felt trepidation toward the market.

Additionally, millennials and Generation Z – those born after 1997 – had to endure the economic and financial turmoil caused by Covid-19. A 2022 study by Fidelity said that 55% of people between 18 and 35 (those belonging to Gen Z and a younger cohort of millennials) put their retirement planning on hold during the pandemic. As a result, 39% of this age group expect to retire later than originally planned.

Here are some investing tips to get millennials and Gen Zers on the path toward saving for the future:

Strategy 1: Start Investing Early

As the youngest set, millennials and Gen Zers have the most to gain by investing early and staying in the game. After all, they will likely have the most time in the market. Because millennials and Gen Zers will have more time to save, they can weather the ups and downs of the markets and take advantage of compound interest.

💡 Recommended: A Beginner’s Guide to Investing in Your 20s

If you are employed, the easiest way to dip your toe in the market is to get involved in your company’s 401(k) savings account as soon as possible. This way, you’ll automatically send a percentage of your paycheck directly into your savings. And if your company has a 401k matching program, you’ll be earning essentially free money.

Strategy 2: Explore Diversification

A great way young people can diversify their portfolios is by investing in the market via mutual funds or exchange-traded funds (ETFs). Mutual funds are portfolios that gather money from investors and then make investments, typically in stocks or bonds. ETFs are similar in that they’re baskets of securities, but ETFs are listed on public markets and can be traded all day.

These are low-cost and diversified ways to invest in a portfolio of stocks and bonds. It’s easy to do this via a robo-advisor that does all the heavy lifting for you.

Strategy 3: Pay Off Debt

Millennials have an average student loan debt of $38,877, while Gen Zers have an average debt of $17,338. The need to pay off this debt contributes to a delay in investing and saving for the future. But it’s still critical to keep on your payments to keep this burden from hanging over your head for too long.

However, just because people of these generations have student loan debt doesn’t mean they can start investing now. A little bit of investing goes a long way, so putting just a little bit in the markets now can pay off in the long run.

The Takeaway

Different generations face different investment challenges, but by and large, important rules to follow include paying off debt as quickly as possible and saving and investing early.

SoFi Invest® is an all-in-one platform for an individual’s investment needs. With SoFi online investing, you can trade company stocks, ETFs, or fractional shares with no commissions for as little as $5. Additionally, those who want help building a portfolio can use SoFi Automated Investing with no SoFi management fee.

Open a SoFi Invest account today.

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Jun
27
2022

Deed of Trust vs Mortgage: What Are the Differences You Should Know?

By | Family Finances, Home Ownership, mortgage | Comments Off on Deed of Trust vs Mortgage: What Are the Differences You Should Know?

If you finance a home, the lender will have you sign a deed of trust or a mortgage. A mortgage involves you and the lender, but a deed of trust adds a neutral third party that holds title to the real estate.

Many states allow either choice. Thanks to an easier foreclosure process, many lenders prefer a deed of trust to a mortgage.

First, some mortgage basics.

Mortgage Loans 101

A mortgage is a loan that’s used to purchase a piece of real estate. First, the borrower applies for a loan from among the different mortgage types.

Once approved, they sign a mortgage note, promising to pay the lender back over a specified time with agreed-upon terms. The real estate serves as collateral for the loan.

You may hear a mortgage note referred to as a promissory note. In any case, it’s a legally binding document.

Mortgage Transfer

A mortgage transfer takes place when a borrower assigns what is typically an assumable mortgage to another person. Most mortgage loans are non-transferable. That said, in the case of marital separation, divorce, death, or other unusual circumstance, a mortgage transfer is sometimes permitted.

FHA, VA, and USDA loans, insured by the government and issued by private lenders, are assumable if the buyer qualifies.

Mortgage Foreclosure

When a borrower defaults on making mortgage loan payments as agreed upon, the lender may start legal proceedings to take ownership of the property and resell it to recover funds owed to the financial institution.

A mortgage foreclosure can take place when a borrower doesn’t meet other terms of the agreement, but failing to make payments is the most common reason. A variety of mortgage relief programs help borrowers stave off foreclosure.

What Is a Deed of Trust?

Some states incorporate a deed of trust into their home loan process, while financial institutions in other states can choose to do so or not. A deed of trust is an agreement that’s signed at a home’s closing that states how a neutral third party — typically the title company — will hold legal title to the home until the borrower pays the loan off.

Terms to know include the following:

•   Trustor: the borrower

•   Beneficiary: the financial institution loaning the money

•   Trustee: a third party that will legally hold the title until the loan is paid off

Deed of Trust Transfer

If the borrower pays off the mortgage loan, the third-party trustee dissolves the trust involved and transfers the title of the real estate to the borrower.

If the borrower sells the home before the balance owed is paid in full, the trustee takes the sales proceeds and pays the lender what is still owed and gives the borrower/trustor the rest of the money.

Deed of Trust Foreclosure

As with a mortgage, there are clauses in the deed of trust agreement that will trigger foreclosure proceedings. In this case, the trustee will sell the property and distribute the funds appropriately.

Similarities Between a Mortgage and a Deed of Trust

Both a mortgage and a deed of trust are used when someone buys a home and takes out a loan to complete the purchase. Under each structure, the lender has the option to foreclose on the home if terms and conditions agreed upon by the buyer are not met.

In states where either option is allowed, the lender will decide which one to use.

Key Differences Between a Mortgage and a Deed of Trust

Here’s the big one: ease of foreclosure by a private trust company when a deed of trust is in place.

Mortgage Deed of Trust
Number of parties Two: borrower and lender Three: trustor (borrower), beneficiary (lender), trustee
Transfers Uncommon Part of the transaction when loan is paid off
Foreclosure Typically involves court Typically handled outside court system, which is usually faster and less costly

How to Determine If You Have a Mortgage or a Deed of Trust

Although deed of trust versus mortgage differences may seem reasonably small, it can make sense to be clear about which one you have. Look at a mortgage statement to find your loan servicer and ask.

A longer route: Mortgages and deeds of trust are publicly filed documents, so you could seek out the local government agency that manages these kinds of records and get a copy.

The Takeaway

Deed of trust vs mortgage? They are the two main systems for securing home loans. One key difference is the presence of a neutral third party in deeds of trust. The trustee holds legal rights over the real estate securing the loan.

It’s easy to get lost in the forest of mortgage matters. The SoFi mortgage help center can lend a hand.

And here are tips on shopping for a mortgage.

When you’re serious about your search, check out the advantages of a SoFi Mortgage and apply for a home mortgage in minutes.

FAQ

Who can be listed on a deed of trust or mortgage?

On a deed of trust, all three parties are listed: the trustor (borrower), beneficiary (lender), and trustee (third party that holds the title until the loan is paid in full). With a mortgage, there is no third party involved.

How are mortgages and deeds of trust recorded in public records?

A deed of trust will be filed and recorded in public records in the county where the house exists. A similar process takes place for mortgage deed recordings. The recorded documents could be located at a county clerk’s office, a public recorder’s office, or an office of public records.

Is your title separate from deed of trust and mortgage?

Yes. A title is a concept rather than a physical document like a deed of trust or a mortgage note, and it refers to a person’s legal ownership of a home or other property. When a property is sold, the title is transferred from the current owner to the buyer.

Does a mortgage involve a trustee like a deed of trust?

No. Deeds of trust require a trustee, but a mortgage does not.

Photo credit: iStock/zimmytws

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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

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