Rollover IRA vs. Traditional IRA: What’s the Difference?

When it comes to retirement savings, one of the building blocks of many strategies is the individual retirement account, or IRA. An IRA is a retirement plan that allows individuals to save money in a tax-advantaged way. In some cases, an individual might open a traditional IRA, and in others, they might have investments from a previous retirement plan that they need to roll over into a rollover IRA.

When it comes to a traditional IRA vs. rollover IRA, there are many similarities— but also a few differences worth noting.

What Is a Traditional IRA?

To understand the difference between a rollover IRA vs. traditional IRA, it helps to understand some IRA basics.

From the moment you open a traditional IRA, your contributions to the account are typically tax deductible, so your savings will grow tax-free until you make withdrawals in retirement. This is advantageous to some retirees: Upon retiring, it’s likely one might be in a lower income tax bracket than when they were employed. Given that, the money they withdraw will be taxed at a lower rate than it would have when they contributed.

What is a Rollover IRA?

A rollover IRA is an IRA account created with money that’s being rolled over from a qualified retirement plan. Generally, rollover IRAs happen when someone leaves a job with an employer-sponsored plan, such as a 401(k) or 403(b), and they roll the assets from that plan into a rollover IRA.

In a rollover IRA, like a traditional IRA, your savings grow tax-free until you withdraw the money in retirement. There are several advantages to rolling your employer-sponsored retirement plan into an IRA, vs. into a 401(k) with a new employer:

•  IRAs may charge lower fees than 401(k) providers.
•  IRAs may offer more investment options than an employer-sponsored retirement account.
•  You may be able to consolidate several retirement accounts into one rollover IRA, simplifying management of your investments.
•  IRAs offer the ability to withdraw money early for certain eligible expenses, such as purchasing your first home or paying for higher education. In these cases, while you’ll pay income taxes on the money you withdraw, you won’t owe any early withdrawal penalty.

There are also some rollover IRA rules that may feel like disadvantages to putting your money into an IRA instead of leaving it in an employer-sponsored plan:

•  While you can borrow money from your 401(k) and pay it back over time, you cannot take a loan from an IRA account.
•  Certain investments that were offered in your 401(k) plan may not be available in the IRA account.
•  There may be negative tax implications to rolling over company stock.
•  An IRA requires that you start taking Required Minimum Distributions (RMDs) from the account at age 72 (or age 70 ½ if you turn 70 ½ in 2019 or earlier), even if you’re still working, whereas you may be able to delay your RMDs from an employer-sponsored account if you’re still working.
•  The money in an employer plan is protected from creditors and judgments, whereas the money in an IRA may not be, depending on your state.

A Side-by-Side Comparison of Rollover IRA vs. Traditional IRA

  Rollover IRA Traditional IRA
Source of contributions Created by “rolling over” money from another account, most typically an employer-sponsored retirement plan, such as 401(k) or 403(b). For rollover amount, annual contribution limits do not apply. Created by regular contributions to the account, not in excess of the annual contribution limit, although rolled-over money can also be contributed to a traditional IRA.
Contribution limits There is no limit on the funds you roll over from another account. If you’re contributing outside of a rollover, the limit is $6,000 per year, plus an additional $1,000 if you’re 50 or older. Up to $6,000 per year, plus an additional $1,000 if you’re 50 or older.
Withdrawal rules Withdrawals before age 59½ are subject to both income taxes and an early withdrawal penalty (with certain exceptions , like for higher education expenses or the purchase of a first home). Withdrawals before age 59½ are subject to both income taxes and an early withdrawal penalty (with certain exceptions , like for higher education expenses or the purchase of a first home).
Required minimum distributions (RMDs) You’re required to withdraw a certain amount of money from this account each year once you reach age 72. You’re required to withdraw a certain amount of money from this account each year once you reach age 72.
Taxes Since contributions are from a pre-tax account, all withdrawals from this account in retirement will be taxed at ordinary income rates. If contributions are tax deductible, all withdrawals from this account in retirement will be taxed at ordinary income rates. (If contributions were non-deductible, you’ll pay taxes on only the earnings in retirement.)
Future rollover options As long as no other (non-rollover) funds have been added to the account, this money can be rolled into a future employer’s retirement plan, if the plan allows it. The money in a traditional IRA cannot be rolled into a future employer’s retirement plan.
Convertible to a Roth IRA Yes Yes

Is There a Difference Between a Traditional IRA and a Rollover IRA?

The money you roll over to a rollover IRA can later be rolled over into an employer-sponsored retirement plan, if the plan allows it. This is not true of money in a traditional IRA.

When it comes to a rollover IRA vs. traditional IRA, the only real difference is that the money in a rollover IRA was rolled over from an employer-sponsored retirement plan. Otherwise, the accounts share the same tax rules on withdrawals, required minimum distributions, and conversions to Roth IRAs.

Can You Contribute to a Rollover IRA?

You can make contributions to a rollover IRA, up to IRA contribution limits. In 2020 and 2021, individuals can contribute up to $6,000 (with an additional catch-up contribution of $1,000 if you’re 50 or older). If you do add money to your rollover IRA, however, you may not be able to roll the account into another employer’s retirement plan at a later date.

Can You Combine a Traditional IRA with a Rollover IRA?

A rollover IRA is essentially a traditional IRA that was created when money was rolled into it. Hence, you can combine two IRAs by having a direct transfer done from one account to another, or by rolling money from one IRA to the other IRA.

There’s one important aspect of the transfer or rollover process that will help prevent the money from counting as an early withdrawal or distribution to you—and that’s being timely with any transfers. With an indirect rollover, you typically have 60 days to deposit the money from the now-closed fund into the new one.

A few other key points to remember: As mentioned above, if you add non-rollover money to a rollover account, you may lose the ability to roll funds into a future employer’s retirement plan. Also keep in mind that there’s a limit of one rollover between IRAs in any 12-month period. This is strictly an IRA-to-IRA limit and does not apply to rollovers from a retirement plan to an IRA.

How to Open a Traditional or Rollover IRA Account

Opening a traditional IRA and a rollover IRA are identical processes—the only difference is the funding. Open a traditional or rollover IRA by doing the following:

•  Decide where to open your IRA. For instance, you can choose an online brokerage firm where you can choose your own investments, or you can select a robo-advisor that will offer automated recommendations based on your answers to a few basic investing questions. (There’s a small fee associated with most robo-advisors.)
•  Open an account. From the provider’s website, select the type of IRA you’d like to open—traditional or rollover, in this case—and provide a few pieces of personal information. You’ll likely need to supply your date of birth, Social Security number, and contact and employment information.
•  Fund the account. You can fund the account with a direct contribution via check or a transfer from your bank account, transferring money from another IRA, or rolling over the money from an employer-sponsored retirement plan. Contact your company plan administrator for information on how to do the latter.

The Takeaway

Both a rollover IRA or traditional IRA allow investors to put money away for retirement in a tax-advantaged way, with very little difference between the two accounts.

One of the primary questions anyone considering a rollover IRA should consider is, will you keep contributing to it? If so, that would prevent you from rolling the rollover IRA back into an employer-sponsored retirement account in the future.

Whether it’s a rollover IRA you’ve created by rolling over an employer-sponsored retirement account or a traditional IRA you’ve opened with regular contributions, either account can play a key role in your retirement game plan.

Interested in learning more about growing your savings with an IRA? Explore IRA accounts at SoFi and read about the broad range of investment options, member services and investment tools available.

Find out how to save for retirement with SoFi.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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) Digital Assets—The Digital Assets platform is owned 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, http://www.sofi.com/legal.

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Intrinsic Value vs Market Value, Explained

Intrinsic value vs market value refers to the difference between where a stock is trading and where it ought to be according to its fundamentals. The term “market value” simply refers to the current market price of a security. Intrinsic value represents the price at which investors believe the security should be trading at. Intrinsic value is also known as “fair market value” or simply “fair value.”

According to Merriam-Webster dictionary, the word “intrinsic” means “belonging to the essential nature or constitution of a thing.” At times, stocks become overbought or oversold, meaning their market price can rise above or below their intrinsic value.

When it comes to value vs. growth stocks, value investors look for companies that are out of favor and below their intrinsic value. The idea is that sooner or later stocks return to their intrinsic value.

What Is Market Value?

In a sense, there is only one measure of market value: what price the market assigns to a stock, based on existing demand.

Market value tends to be influenced by public sentiment and macroeconomic factors. Fear and greed are the primary emotions that drive markets. During a stock market crash, for example, fear may grip investors and the market value of many stocks could fall well below their fair market values.

News headlines can drive stock prices above or below their intrinsic value. After reading an earnings report that’s positive, investors may pile into a stock. Even though better-than-expected earnings might increase the intrinsic value of a stock to a certain degree, investors can get greedy in the short-term and create overextended gains in the stock price.

The rationale behind value vs price, and behind value investing as a whole, is that stocks tend to overshoot their fair market value to the upside or the downside.

When this leads to a stock being oversold, the idea is that investors could take advantage of the buying opportunity. It’s assumed that the stock will then eventually rise to its intrinsic value.

What Is Intrinsic Value?

The factors that can be used to determine intrinsic value are related to the fundamental operations of a company. It can be tricky to figure how to evaluate a stock. Depending on which factors they examine and how they interpret them, analysts can come to different conclusions about the intrinsic value of a stock.

It’s not easy to come to a reasonable estimation of a company’s valuation. Some of the variables involved have no direct physical, measurable counterpart, like intangible assets. Intangible assets include things like copyrights, patents, reputation, consumer loyalty, and so on. Analysts come to their own conclusions when trying to assign a value to these assets.

Tangible assets include things like cash reserves, corporate bonds, equipment, land, manufacturing capacity, etc. These tend to be easier to value because they can be assigned a numerical value in dollar terms. Things like the company’s business plan, financial statements, and balance sheet have a tangible aspect in that they are objective documents.

Calculating Intrinsic Value vs Market Value

There can be multiple different ways to determine the intrinsic value of an asset. These methods are broadly referred to as valuation methods, or using fundamental analysis on stocks or other securities. The methods vary according to the type of asset and how an investor chooses to look at that asset.

Calculating Intrinsic Value

For dividend-yielding stocks, for example, the dividend discount model provides a mathematical formula that aims to find the intrinsic value of a stock based on its dividend growth over a certain period of time. Here is what is a dividend: periodic income given to shareholders by a company.

Upon calculating the dividend discount model, an investor could then compare the answer to the current market value of a stock. If market value were to be lower, then the stock could be seen as undervalued and a good buy. If market value were to be higher, then the stock could be seen as overvalued and not worth buying or possibly an opportunity to sell short.

Another method for estimating intrinsic value is discounted cash flow analysis. This method attempts to determine the value of an investment in terms of its projected future cash flows.

While the dividend discount model and discounted cash flow analysis can be seen as objective ways to determine a stock’s value, they also have a large subjective component. Analysts must choose a timeframe to use in their model. Using different timeframes can lead to different conclusions.

Longer timeframes are often thought of as being more accurate because they include more data points. But they could also dilute the significance of more recent trends.

Example Using Dividend Discount Model

For example, if a company had years of steady dividend growth, but recently slashed its dividend by 50%, a dividend discount model analysis based on a long timeframe would show this reduction in dividend payments to be less severe than an analysis based on a shorter time frame.

The longer timeframe would include previous years of dividend growth, which would theoretically outweigh the recent reduction.

The reduction may have come from a large decrease in earnings. If that trend were to continue, the company could be doomed to the point of having to suspend its dividends (as many companies did in 2020). So in this hypothetical example, a shorter time frame could actually lead to a more realistic conclusion than a longer one.

Calculating Market Value

The determination of market value is rather simple by comparison. Someone can either simply look at what price a stock is trading at or calculate its current market capitalization. The formula for market capitalization or market cap is:

Total number of outstanding shares multiplied by the current stock price.

Dividing market cap by number of shares also leads to the current stock price.

Sometimes companies engage in “corporate stock buybacks,” whereby they purchase their own shares, which reduces the total number of shares available on the market.

This increases the price of a stock without any fundamental, tangible change taking place. Value investors might say that stocks pumped up by share buybacks are overvalued. This process can lead to extreme valuations in stocks, as can extended periods of market euphoria.

The Takeaway

Using the intrinsic value vs market value method is best suited to a long-term buy-and-hold strategy.

Stock prices can remain elevated or depressed for long periods of time depending on market conditions. Even if an investor’s analysis is spot on, there’s no way to know for sure exactly when any stock will return to its intrinsic value.

Value investors try to understand stock volatility, using these periods as opportunities for rebalancing their portfolios, selling positions that might have increased a lot while adding to positions that may have fallen far below their intrinsic value. This contrasts to short-term day trading strategies or momentum swing-trading, which primarily uses technical analysis to try and predict and profit from short-term market fluctuations.

Found a stock you think is undervalued? Try SoFi Invest®, where investors can choose any of the most popular stocks and ETFs.

Check out SoFi Invest today.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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) Digital Assets—The Digital Assets platform is owned 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, http://www.sofi.com/legal.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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What is Ripple XRP? Everything to Know for 2021

Cryptocurrency is a fast-moving space with new technologies and names arising on a daily basis. One of the largest and more polarizing subjects in the space is Ripple XRP, a private-company-founded platform and cryptocurrency launched in 2012. It has gained notoriety for its unique founding, structure, and operations.

Ardent supporters back its real-world adoption and growth potential. Dissenters contend that because of many of these same factors, it’s philosophically misaligned with cryptocurrency ideals and fundamentals.

Despite these contentions, Ripple XRP has grown to become a household name in cryptocurrency. Here’s everything you need to know about this cryptocurrency, and how to invest in it.

What is Ripple?

Ripple is both a currency-exchange system designed to allow fast and low-cost transactions, and a cryptocurrency in its own right. Ripple’s primary goal is to connect financial institutions, payment providers, and digital asset exchanges to provide faster and cheaper global payments.

Created in 2012 by Jed McCaleb and Chris Larsen, Ripple is perhaps better known for its open-source, peer-to-peer decentralized platform, RippleNet, which enables money to be transferred globally in any fiat or cryptocurrency denomination between financial institutions.

Ripple makes some improvements on common shortfalls associated with traditional banks. Transactions on the Ripple Network are settled in seconds even under the regular stress of millions of transactions. Compare this to banks’ wire transfers which typically can take days to weeks to complete and can cost anywhere from $15 to $30 or more if sending or receiving internationally. Fees on Ripple vary based on the transaction size but overall are minimal, with the minimum cost for a standard transaction at 0.00001 XRP.

Whereas top cryptocurrencies like Bitcoin, Ethereum, and Litecoin are designed to be used primarily by individuals, Ripple’s system is designed to be adopted by banks, funds, and institutions.

What is XRP?

XRP is the currency issued and managed by Ripple (though users can also create their own currency on the platform). Ripple began selling XRP in 2012 to fund company operations, allowing its users to buy cryptocurrency, though it has taken a backseat to the company’s primary objective of developing RippleNet.

Throughout Ripple’s lifespan, leadership has reframed how XRP fits into the company’s business model, originally proclaiming it as the fuel on which its borderless payments technology runs, and later as a more efficient medium of exchange than Bitcoin.

XRP tokens represent the transfer of value across the Ripple network and can be traded on the open cryptocurrency market by anyone. Unlike Bitcoin’s popular store-of-value narrative use-case, XRP is primarily used for payments and borderless currency exchange. While Ripple’s centralized infrastructure concerns some in the cryptocurrency space, its fast transaction speeds, low transaction costs, and low energy usage provide superior performance as a medium of exchange compared to many blockchain-based cryptocurrencies.

(Need a crash course on crypto before you can read any further? Check out our guide to cryptocurrency.)

What is the XRP Price?

At the time of reporting, the XRP price is $0.474494. It’s all-time high was $3.8419 in January 2018. It went as low as $.0041 in November 2015.

How Does Ripple Work?

There are two main technologies to be aware of when it comes to Ripple and XRP. Specifically, the XRP ledger (XRPL) and the Ripple Protocol Consensus Algorithm (RPCA). Here’s how they work.

XRP Ledger (XRPL)

RippleNet is built on top of its own blockchain-like distributed ledger database, XRP Ledger (XRPL), which stores accounting information of network participants and matches exchanges among multiple currency pairs. The transaction ledger is maintained by a committee of validators who act like miners and full-node operators to reach consensus in three to five seconds—versus Bitcoin’s 10 minutes. Because there are no miners competing to confirm transactions for block rewards, validators verify transactions for no monetary reward.

Anyone can become an XRP validator, but in order to gain trust and be used by others on the network, validators must make Ripple’s unique node list (UNL), deeming them a trusted Ripple validator. These centralized validators are critical to prevent double-spending and censorship of transactions. There are only 35 active XRP validators; six are run by Ripple.

Ripple Protocol Consensus Algorithm (RPCA)

XRP’s design is predicated on speed and cost, as opposed to decentralization. Unlike different types of cryptocurrency like Bitcoin and Ethereum, which are built on the blockchain and validated by miners through the Proof of Work consensus mechanism, Ripple confirms transactions through its own consensus mechanism, the Ripple Protocol Consensus Algorithm (RPCA).

By avoiding Proof of Work’s energy-intensive mining, Ripple transactions require less energy than Bitcoin or Ethereum, are confirmed faster, and cost less. However, this speed is ultimately achieved because of XRP’s centralized infrastructure, which some argue makes the network less secure, censorship-resistant, and permissionless than open-source blockchain networks.

Ripple Cryptocurrency Token Supply

Unlike many other cryptocurrencies, XRP is not mined. The token’s entire supply was created when the network first launched in 2012 and Ripple executives intermittently tap into an escrow to release segments of the supply to sell on the open market.

In other words, unlike Bitcoin’s decentralized economy, XRP’s supply and issuance is centralized and governed by a few authorities. Because the total supply already exists, no more will be created into existence, thus making XRP fixed in quantity and not inflationary.

As of January 2021, only 45 billion XRP tokens are in circulation, out of the maximum total 100 billion. Due to the vast circulating supply, XRP has had one of the largest market caps of any cryptocurrency, even briefly eclipsing that of Ethereum’s second-largest cap late in the 2017-2018 bull market.

Ripple Crypto and Regulatory Trouble

In late 2020, Ripple became the target of an SEC investigation . The regulatory body determined that Ripple Labs Inc. and two of its executives, Co-Founder Chris Larsen and CEO Bradley Garlinghouse, had raised over $1.3 billion through an “unregistered, ongoing digital asset securities offering” to finance the company’s operations. Consistent with recent cryptocurrency rules set by the SEC, Ripple’s leaders were charged with unlawful issuance of securities in the form of sales of its XRP token, raising questions about compliance with cryptocurrency taxes.

The XRP price crashed amid the fallout, from over $0.60 to under $0.30, as prominent crypto exchanges began delisting the token and Ripple executives, including Founder Jed McCaleb, sold off personal XRP holdings worth millions.

Is Ripple a Good Investment?

Though XRP has been impacted by Ripple’s legal blow, XRP is an independent token that can and does function somewhat outside of Ripple’s business model. The crash in price and soured fundamental outlook may not paint a bright picture of XRP as an investment to some. Whether XRP recovers and continues to evolve with the rest of the crypto herd remains to be seen, but as investors look for value in undervalued assets, it doesn’t hurt to do further research and form an educated conclusion.

Pros and Cons of Ripple XRP

Because Ripple is different in some ways from other cryptocurrencies, it makes sense to review its perceived pros and cons before making any investing decisions.

Pros of Ripple XRP

•  Fast speeds
•  Low fees
•  Fixed supply
•  Interest/tentative adoption by financial institutions

Cons of Ripple XRP

•  Centralized infrastructure, governance, issuance
•  Corruptible validators
•  Unsupported by many exchanges

How to Invest in XRP

To start investing in Ripple, you first need to join a crypto exchange. Signing up for an account could include different verification processes, depending on the exchange. Once you’re signed up, you’re ready to trade or buy Ripple XRP. You can trade any current crypto you own, or you can buy a major cryptocurrency like Bitcoin or Ethereum and then use that to buy Ripple XRP.

The Takeaway

Ripple XRP is a global digital payments system that sacrifices decentralization for performance. The network and technology is owned and at least partly run by Ripple, the private company, which controls the underlying infrastructure, supply, and some of the limited network validators. While Ripple strays from the conventional decentralization model adopted by leading cryptos Bitcoin and Ethereum, it conforms to some degree through its own specially-designed infrastructure.

Although Ripple’s primary goal is providing a borderless payments and currency exchange gateway for financial institutions, its native cryptocurrency XRP has taken on a life of its own and is actively traded and analyzed by investors. With high-ranking metrics such as fast and inexpensive transactions, some investors argue XRP is a strong competitor to large cryptocurrency blockchains such as Bitcoin and Ethereum. Conversely, Ripple XRP’s centralization has been a major philosophical and security concern for others—including US regulatory bodies.

Cryptocurrency is an exciting new technology that’s disrupting money as we know it. With SoFi Invest®, members can invest in some of the most popular cryptocurrencies—Bitcoin, Ethereum, and Litecoin.

Find out how to invest in cryptocurrencies with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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) Digital Assets—The Digital Assets platform is owned 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, http://www.sofi.com/legal.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.

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5 Easy Steps to Invest in Litecoin

5 Easy Steps to Invest in Litecoin

When anyone mentions crypto, the first name that usually comes to mind is Bitcoin. However, there are hundreds more cryptocurrencies that have been around nearly as long as the first cryptocurrency but at a fraction of the price, such as Litecoin.

If Bitcoin is digital gold, then Litecoin is digital silver; it is faster and more abundant. Casual investors can invest in this virtual coin in just a few steps.

What is Litecoin?

Litecoin (LTC) is a peer-to-peer cryptocurrency and open-source software project like Bitcoin, designed for cheap and fast transactions. It was created in 2011 through a soft fork of the Bitcoin blockchain and was one of the first Bitcoin spinoffs or “altcoins.”

One of Litecoin’s lead premises was to provide faster transactions by confirming a new block on the Litecoin Network every 2.5 minutes as opposed to Bitcoin’s 10 minutes. Like Bitcoin, Litecoin can be purchased and sold through online platforms such as digital currency exchanges and alternatively, be mined with specialized computer hardware through a version similar to Bitcoin’s Proof of Work mechanism.

Litecoin’s price is generally correlated to Bitcoin’s price movements, rising when Bitcoin rallies and falling when Bitcoin declines. Due to Litecoin’s faster transaction speeds and lower fees, some merchants, vendors, and blockchain applications have introduced Litecoin payment processors.

This demand has also contributed to many major global cryptocurrency exchanges to list Litecoin, making buying cryptocurrency more accessible around the world.

Buy Litecoin in 5 Steps

1. Get a Litecoin Wallet

The first step to buying Litecoin is having somewhere to store it. There are several ways to store Litecoin depending on convenience or security needs. Though cryptocurrency exchanges and investing platforms offer custody services to hold cryptocurrency, investors typically only use exchanges and investing platforms to purchase Litecoin and then withdraw the coins to a Litecoin wallet.

The first step is to determine which type of cryptocurrency wallet better fits investing needs, of which there are two distinctly different types.

Hot Wallet

A “hot wallet” is an easy and free way to store Litecoin through a service connected to the internet. Hot wallets are popular and typically accessed through websites, browser extensions, or desktop applications.

Hot wallets are also convenient for users because they are always online and can be accessed from a different device if an old device becomes inoperable. However, it’s because hot wallets are connected to the internet that they can be more vulnerable to hacks and theft. When creating a wallet, the user is provided with three important components to be safely stored for future use:

•  Public Key Address: The wallet’s public address that is shared with others in order to receive Litecoin. This will need to be readily accessible to withdraw funds to the wallet.
•  Private Key: Private password consisting of an arbitrary string of letters and numbers required to access the wallet’s funds.
•  Seed Recovery Phrase: A backup login method in case the private key gets lost, which consists of a list of random words in a sequential order. Some wallet providers may offer different length seed phrases but typically contain 12, 18, or 24 random words.

Coinbase, the largest U.S. cryptocurrency exchange, also provides hot wallet services. Mycelium, Exodus and Electrum are other examples of some hot wallet providers.

Cold Wallet

Another option for investors concerned about online safety is a “cold wallet,” a physical device that must be purchased and is only ever connected to a computer to send or receive cryptocurrency as needed. Otherwise, it is safely stored by the individual owner where it remains offline and disconnected from any computer or internet connection.

This security measure creates an “air gap” between potential malicious parties and any form of online or local area network (LAN) access to Litecoin in storage. While individual cryptocurrency owners tend to self-custody and store cold wallets at home, it is not unheard of for investors to take further measures and store a cold wallet in a bank-protected vault. Trezor and Ledger are examples of cold wallet makers.

2. Create Account on Cryptocurrency Exchange

The safest method for buying cryptocurrency is through a reputable digital currency exchange, an investing platform exclusively for buying and selling digital currencies.

Coinbase is the largest cryptocurrency exchange in the U.S. by volume. Binance, Gemini, Kraken, Cash App and Bisq are other well-known, popular markets. As cryptocurrencies become more popular, it’s also become possible to buy Litecoin and other cryptocurrencies through online investing platforms like SoFi Invest®.

The first step to invest in Litecoin is to create an account on a digital currency exchange or investing platform that sells Litecoin. This starts by registering a username, complex password, and storing them in a safe place offline.

Next, new users will be required to verify their identity by providing basic personal information such as date of birth, address, nationality, and providing a form of personal identification such as a valid government-issued driver’s license or passport.

Financial companies are required to comply with SEC-mandated Know Your Customer and Anti-Money Laundering (KYC/AML) cryptocurrency regulations to prevent fraud and provide an assurance of customer due diligence. This process is subject to approval and may take a couple days before being approved to continue funding the account and using it to trade.

3. Deposit Funds Into Cryptocurrency Account

Once the account is created, a funding method must be linked to the account to transfer money into the account. Bank accounts are typically used to fund accounts but some platforms may also allow other third party payment providers or wire transfers.

The user may be asked to provide the bank account number and routing number in order to link a bank account, after which a series of microtransactions may be initiated to confirm a successful connection.

After an account is successfully connected, funds may be transferred from the funding account to the investing account, which can then be used to buy Litecoin. Funds may be deposited up to a certain dollar amount and will then be available to trade. Prices of Litecoin have soared since the end of 2019, rising more than 300% to $174.48 near the beginning of February 2021.

4. Submit Buy Order

Once the account is funded, it’s time to buy Litecoin. It may be possible to pick from two options: a market order or limit order.

After a buy order executes, the required funds will be debited from the account’s balance and the purchased coins will appear in the account. The newly-purchased Litecoin is immediately available for spending, trading, or transfer.

Market Order

Market orders are more common for even simple investing platforms. A market order simply buys the designated amount of Litecoin at the current market price. This can result in some price slippage especially during volatility, but guarantees that a buy order is executed immediately.

Limit Order

Limit orders allow for some flexibility and precision in buying only at certain prices. An investor can determine at what price they want to buy and nothing higher. If the price is never met, the trade doesn’t execute. A limit order can be set for the day or in some cases for a couple months.

5. Withdraw Litecoin

After purchasing Litecoin, the next step is to withdraw it from the investing platform and send it to a private and secure wallet. This process is completed as follows:

•  Initiate a withdrawal request
•  Input the desired token withdrawal amount
•  Copy and paste the newly created wallet’s public address
•  Submit the withdrawal request

The request should initiate immediately and place the withdrawal order into a queue on the Litecoin network. Because Litecoin’s transaction speed is multiple times as fast as Bitcoin’s, it should only be a matter of minutes before the requested withdrawal amount appears in the designated wallet’s balance.

Is Litecoin a Good Investment?

Litecoin is one of the oldest cryptocurrencies having been around since 2011. It has maintained its position as one of the most popular cryptos, consistently being a top-five cryptocurrency based on token price and market cap.

While there are many different types of cryptocurrency, some of which are not yet actively functioning or as time-tested, Litecoin’s network has been among the fastest transaction speeds in cryptocurrency for years. Litecoin is easily accessible on many global digital currency exchanges and investing platforms, providing the token with high liquidity and global market penetration.

After initially trading for a few cents in late 2011, Litecoin has seen exponential growth over time. Litecoin also has a total maximum supply of 84 million compared with Bitcoin’s maximum supply of 21 million, making Litecoin four times as abundant as Bitcoin but more scarce than many other large cryptocurrencies such as Ripple and Ethereum.

The Takeaway

Proponents of cryptocurrencies say the market is here to stay and disrupt the traditional financial sector. Retail investors have immediate access to investing in disruptive cryptocurrency projects like Litecoin alongside accredited investors.

As the cryptocurrency asset class transitions from one market cycle to another, some investors argue that it can continue to provide outsized investment opportunities.

In addition to Bitcoin, investors have other investment options in cryptocurrency including Litecoin. With the option of buying whole or fractional coins, Litecoin is a user-friendly investment option that allows users to buy as much or as little Litecoin as desired and transfer it quickly.

With SoFi Invest, investors can buy whole or fractional amounts of Litecoin through a safe and secure investing platform.

Find out how SoFi Invest can help you reach your financial goals.


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.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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) Digital Assets—The Digital Assets platform is owned 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, http://www.sofi.com/legal.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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What is Binance (BNB) Crypto? BNB Price & How to Buy BNB

Binance (BNB) is a cryptocurrency token that was created to be used as a medium of exchange on Binance, one of the world’s largest cryptocurrency exchanges.

Traders who hold BNB tokens get discounts when using BNB to pay for trading fees on Binance. As of 2020, BNB users received a 6.25% rebate on trading fees. Binance Coin also serves as the native token for Binance’s decentralized exchange (DEX).

What Is Binance?

Binance is one of the world’s biggest cryptocurrency exchanges. Based in Malta, the exchange was founded in 2017 and follows all standard cryptocurrency regulations. Binance offers a variety of features, including:

•  Crypto-to-crypto trading of many different currency pairs (over 150)
•  Fiat-to-crypto trading
•  The ability to buy crypto with a credit card
•  Futures and leveraged trading for advanced traders
•  The option to choose between a basic interface for beginners or an advanced interface for experienced traders

Binance has one the highest liquidity of any crypto exchange in the world, according to data from CoinMarketCap. That means more crypto can trade hands on the exchange than anywhere else during a given period of time, making Binance a desirable place for day traders who thrive on liquid assets, which makes it easier and faster to execute trades. The exchange also has low fees, so users can make more trades for less cost.

Binance derives its name from a combination of the words “finance” and “binary.” The exchange claims to have high levels of security and is capable of processing about 1.4 million orders each second.

Eleven days before Binance went live, BNB was created through an initial coin offering. While the coin was first issued as an ERC-20 token running on the Ethereum network, these same coins were later swapped with BEP2 BNB coins in April 2019 when the Binance Chain mainnet launched (Binance’s own blockchain network). BNB can be used as “gas” payments–fees paid for computing power–to fuel transactions on the DEX.

Is Binance Coin Worth Buying?

This question might not have a single, objective answer. It depends on the individual. Someone who wants to use Binance’s decentralized exchange (DEX) might think BNB crypto is worth buying. The Binance DEX first went live in April 2019.

Traders who make a lot of trades on Binance on a regular basis might benefit from the discounts that BNB provides. They could wind up saving them a lot of money.

And finally, some cryptocurrency traders might speculate, as opposed to invest, that BNB has a promising future. These people might see BNB as a good coin to hold for some time, in hopes that the price will continue to rise. BNB crypto has risen over 34,000% since inception and over 41,000% since its all-time low.

What is Binance Coin Used For?

As far as different types of cryptocurrencies go, Binance Coin might be one of the most unique. As mentioned, BNB serves two main purposes:

•  To provide discounts to traders who use BNB on Binance, and
•  To function as “gas” for transactions on Binance’s decentralized exchange (DEX).

When someone places a trade on Binance, they are charged a 0.5% trading fee. This fee can either be paid in the form of the cryptocurrency being traded at the time or in the form of Binance Coin. When paid using BNB, a discount is applied.

Beyond that, altcoins like Binance Coin are also used for speculative purposes. Traders buy coins at a low price with the hopes of selling them later at a higher price to make a profit.

How to Buy BNB

Binance Coin can be purchased on the Binance crypto exchange. There are three primary trading pairs:

•  BNB/USDT (Binance-Tether stablecoin)
•  BNB/BTC (Binance-Bitcoin)
•  BNB/BUSD (Binance-U.S. dollar)

While BNB crypto was created by and for Binance, traders can buy BNB tokens on other exchanges as well. As of the time of writing, BNB can be traded on dozens of different exchanges.

Users who already hold some Bitcoin might find it easiest to deposit Bitcoin to an exchange that trades the BNB/BTC pair and then trade their bitcoin for BNB. Those who don’t hold Bitcoin could consider creating an account on Binance and funding it using either a stablecoin like Tether or U.S. dollars directly.

Binance Coin Price

At the time of writing, the BNB price was $40.39 or 0.001076 Bitcoin.

In July 2017, when the coin was first created, the price was closer to $0.10, with the all-time low being $0.096. The all-time high, as of January 2021, was $45.16, reached on Jan. 10, 2021.

BNB is currently ranked as the eleventh largest cryptocurrency, according to CoinMarketCap data, with a market cap of over $5.7 billion. The 24-hour trading volume on Jan. 14, 2021 was $548.3 million.

BNB crypto has a circulating supply of 142,406,561 BNB and a maximum supply of 174,152,673 coins.

Is Binance Better Than Coinbase?

Some users might compare Binance to other prominent exchanges, including Coinbase. The comparison is, however, largely subjective. For those new to crypto seeking ease-of-use and simplicity, Coinbase might be a good option. They allow for purchases and sales of many of the top cryptocurrencies.

Coinbase also has a cold storage, multi-signature feature called “vaults.” Vaults provide a more secure way to hold crypto for the long-term. To access funds held in a vault, a user must verify a withdrawal request from two different email addresses and wait through a 48-hour processing period.

On the other hand, for more active traders seeking a wider variety of tokens to choose from and higher liquidity, Binance could be preferable. At Binance, investors and traders also have the option to use a more advanced interface with detailed charts.

Is Crypto Safe On Binance?

The answer to this question depends on an individual’s definition of “safe” and how much money is in question.

Generally speaking, it might be safe to keep small amounts of crypto on a secure exchange like Binance for a short period of time. Binance boasts some of the strongest security in the industry. For larger balances to be held over longer time-frames, however, holding coins on any exchange is widely regarded as not being very secure.

Over the years, many exchanges have been hacked. This creates the most obvious security risk involved with “hot wallets,” or cryptocurrency wallets that are actively online at all times. Another risk that comes from exchanges is theft. Employees of the company could conspire to steal user funds and blame the event on outside malicious actors.

The Takeaway

Binance (BNB) coins were created to be used on the Binance cryptocurrency exchange. BNB users on BNB can get trading discounts. However, BNB has become more popular in recent years, experiencing a tremendous increase in price, and now, cryptocurrency traders and investors can find it on many other exchanges.

With SoFi Invest®, investors can buy cryptocurrencies like Bitcoin, Ethereum and Litecoin, while following the prices of others like XRP and BNB. They can also invest in stocks or exchange-traded funds (ETFs).

Get started today.



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.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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) Digital Assets—The Digital Assets platform is owned 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, http://www.sofi.com/legal.

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

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