Growing Wealth Archives

Jun

2025

Investing in Chinese Stocks

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

Table of Contents

Can You Invest in Chinese Stocks?
What Are the Best Chinese Stocks to Buy?
How Can Foreigners Invest in the Chinese Stock Market?
Pros & Cons of Buying Chinese Stocks
Are Chinese Stocks Undervalued?
FAQ

China represents a part of the global investor marketplace known as the “emerging markets,” or countries that are headed toward first-world status and undergoing a period of rapid growth. China has the second-largest economy in the world and is rapidly growing. Economists estimate that the country will overtake the United States to become the largest economy in the years to come.

Some prominent macro investors have expressed positive sentiments about emerging market opportunities. In spite of the potential opportunities, investing in foreign stocks can be confusing, scary, and in some cases impossible.

Key Points

• China is the world’s second-largest economy, and investing in Chinese stocks may attract the interests of certain investors

• Delisting of certain Chinese companies from U.S. stock exchanges introduces investment risks.

• China’s long-term economic outlook may make Chinese stocks appealing to some, depending on their objectives.

• Investing in Chinese stocks may provide an option for international diversification, spreading risk and potentially enhancing portfolio protection.

• U.S. investors can access Chinese stocks through ETFs, mutual funds, or direct purchases via brokerage firms.

Can You Invest in Chinese Stocks?

The short answer is yes, investors located in the U.S. and elsewhere do generally have the capability of trading international stocks, including investing in Chinese stocks. The details aren’t always so simple, though.

The majority of Chinese stocks can only be traded on Chinese exchanges, including the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Shenzhen Stock Exchange.

There are ways for foreign investors to participate in these markets, either directly or through various types of investment vehicles or intermediaries. For the most part, buying Chinese stocks is technically not unlike buying U.S. stocks. Investors may only need to search for specific securities or utilize a special intermediary firm in addition to their standard brokerage. Investors in the U.S. should also be aware that delisted Chinese stocks may or may not return to exchanges.

What Are the Best Chinese Stocks to Buy?

For investors in the U.S., choices may be limited. If there are a limited number of Chinese stocks that can be purchased directly on a stock exchange, then it’s just a matter of evaluating stocks on the list choosing whichever ones seem most attractive.

How Can Foreigners Invest in the Chinese Stock Market?

To buy and sell stocks on foreign exchanges, investors often have to contact their brokerage firms and ask if they allow participation in foreign markets. If the answer is yes, the firm could then consult with a market maker, known as an affiliate firm. Affiliate firms, which are located in the country where foreign investors want to buy stocks, help facilitate these types of transactions.

The easiest way for many investors to gain exposure to the Chinese stock market might be to purchase shares in an emerging markets mutual fund or exchange-traded funds (ETFs) that includes some stocks from publicly-traded companies based in China.

To do this, investors can look for funds that track a Chinese index. Some examples include:

• Shenzhen Composite Index, which tracks the Shenzhen Stock Exchange

• Shanghai Shenzhen CSI 300 Index, which tracks parts of the Shanghai and Shenzhen exchanges

• Shanghai Stock Exchange Composite Index, which tracks the Shanghai Stock Exchange

As far as the actual process of buying Chinese stocks is concerned, doing so will look like buying any other stock. This holds especially true for those buying an ETF or mutual fund. Buying individual Chinese securities may involve an extra step with an affiliate firm, as mentioned earlier.

In either case, investors have to first open a brokerage account, decide which securities they would like to own, then create appropriate buy orders.

Pros & Cons of Buying Chinese Stocks

While the decision ultimately lies with an individual investor, there are both pros and cons of global investments, including Chinese stocks. Here, we will explore both perspectives.

Pros of Buying Chinese Stocks

Factors like a long-term outlook, China’s response to the recent health crisis, and international diversification can make Chinese stocks appealing to some investors.

Long-term Time Horizon

Some investors believe that Chinese investments have a positive long-term outlook— regardless of any short-term political concerns (more on that in Cons of Buying Chinese Stocks, below).

China’s Response to the COVID-19 Pandemic

After the COVID-19 pandemic shut down most major economies in the world for an extended period of time, many areas saw contracting economic growth and continued to struggle. China, on the other hand, responded quickly and was able to reopen its economy sooner than many others, marking the country as a champion of growth throughout the pandemic and beyond.

International Diversification

Some investors choose to invest in the stocks of different countries as a way to further diversify their portfolios. The rationale: An investor could be diversified within and across different industries, but if something were to negatively affect the economy of the country those industries are in, it might not matter.

Cons of Buying Chinese Stocks

There are a few reasons why some investors might choose to avoid Chinese stocks.

Delisting of Some Chinese Companies

In recent times, executive orders have removed some Chinese stocks from American stock exchanges, including a Chinese oil firm named Cnooc (CEO) and China Mobile (CHL).

Growth Limits

Though there’s been economic growth in China, some believe the nature of the Chinese government could stifle innovation going forward. Which industries survive and which ones don’t can sometimes be determined by a simple forced government decision. One perspective is that China’s best growth days are behind it.

Are Chinese Stocks Undervalued?

It is impossible to say for certain. From a long-term perspective, if someone assumes that China will keep growing at a similar pace as it has in the past, then Chinese stocks in general could be viewed as undervalued. But there could also be some sectors that are currently overvalued, some stocks more undervalued than others, and so on.

The Takeaway

China is considered to be one of the strongest emerging market economies, leading some investors to see potential for returns there. Foreign investors have several options if they want to invest in Chinese stocks. Doing so may not be any different than buying stocks in one’s home country. And because of its large economy, there may be other stocks affected by China as well, even if they aren’t Chinese stocks.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

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

FAQ

Can American investors invest in Chinese stocks?

Yes, investors located in the U.S. and elsewhere do generally have the capability of trading international stocks, including investing in Chinese stocks. The details aren’t always so simple, though, and there may be additional considerations to make.

What are the risks of investing in Chinese stocks?

There is the possibility that Chinese stocks could be delisted off of stock exchanges, and there may also be concerns related to Chinese firms’ growth potential that investors should take into account.

Why might investors find Chinese stocks attractive?

China is the world’s second-largest economy, and many investors believe that there is a lot of room for growth and the generation of potential returns from Chinese stocks. They can also offer the potential for portfolio diversification.

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

SOIN-Q225-138

Jun

2025

What Is a Market Maker?

By Inyoung Hwang | Financial Topics, Growing Wealth, invest, Investing, Terminology | Comments Off

Table of Contents

How Market Makers Work
How Market Makers Earn Money
What Are Designated Market Makers (DMMs)?
FAQ

Market makers are trading firms that continuously provide prices at which they will buy or sell securities. Market makers are typically banks, brokerage firms or proprietary trading firms. Unlike traditional investors, they’re not in the business of betting whether the price of an asset will go up or down. They also don’t tend to hang on to securities for very long. Instead, market makers profit off the tiny price spreads that come from buying and selling securities rapidly.

Because they stand ready to do both sides of a trade, market makers are considered to be liquidity providers. Liquidity is the ease with which an asset can be bought or sold without affecting its price.

Key Points

• Market makers continuously provide prices for buying and selling assets, ensuring liquidity and market stability.

• Market makers earn profits through the bid-ask spread, a small margin between buying and selling prices.

• In liquid markets, bid-ask spreads are narrow; in volatile markets, spreads widen to manage risk.

• Market makers frequently use hedging strategies to protect against price fluctuations and reduce risk.

• Payment for order flow allows brokerage firms to offer zero-commission trading, benefiting retail investors with potential price improvements.

How Market Makers Work

In both stock and equity options trading, there are at least a dozen different exchanges. In order to provide prices across multiple exchanges, market makers rely on algorithms and ultra-fast computer systems to make sure their price quotes reflect the supply and demand for a security in the market.

Because of their use of such technology, market makers are sometimes called high-frequency traders. Here’s a closer look at the role market makers play in financial markets today.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

How Market Makers Earn Money

Market makers seek to profit off the difference in the bid-ask spread, or the difference between the price at which an asset can be bought and the price at which it can be sold.

Overview of Bid-Ask Spreads

Here’s a hypothetical example of how market making works.

Let’s say a firm provides a quote for $10-$10.05, 100×200. That means they’re willing to buy 100 shares for $10, while simultaneously offering to sell 200 shares at the price of $10.05. The first part of the offer is known as the bid, while the latter is known as the ask. The prices that market makers set are determined by supply and demand in the market.

This means an investor or broker executing on behalf of a client can buy shares from the market maker at $10.05. And another investor looking to sell shares, can do so at $10 to this market maker. The difference of 5 cents is how the market maker locks in a profit. While making pennies on each trade sounds miniscule, it can be massively profitable at huge volumes.

Bid-ask stock spreads tend to narrow when markets are more liquid and widen when markets are less liquid. This is because during periods of volatility, sellers are more inclined to sell while buyers are more likely to stay put, anticipating lower prices in the near future.

Because bid-ask spreads tend to widen during periods of stock volatility, it also means market makers are able to capture bigger profits when markets are turbulent. Additionally, because of the risk of holding onto securities while making markets on them, market makers often hedge their bets by getting exposure to other assets or shorting securities in separate trades.

Overview of Payment for Order Flow

Another way some market makers earn revenue is through a practice known as payment for order flow (PFOF). This is when retail brokerage firms send retail client orders to market makers who then execute the orders.

So let’s say for example, a mom-and-pop investor at home puts in a buy or sell trade via their brokerage account. The broker then bundles that order with other client orders and sends them to an electronic market making firm, which then fulfills the orders.

Market makers pay fees to brokerage firms for sending those orders, and this is how brokerage firms have been able to offer zero-commission trading to retail clients in recent years.

Payment for order is common and legal, but it’s come under controversy over the years with some critics saying the practice incentivizes brokers to boost revenue, rather than find the best prices for their customers. Market makers are required by regulatory rules to execute client orders with “best execution,” but execution quality can be defined by price, speed, or liquidity.

Defenders of PFOF argue that retail investors get “price improvement,” when customers get a better price than they would on a public stock exchange.

Recommended: Brokerage Accounts Explained

What Are Designated Market Makers (DMMs)?

Designated market makers are trading firms on the New York Stock Exchange who are in charge of ensuring orderly trading of stocks listed on the New York Stock Exchange. Each company that chooses to list on the Big Board picks a DMM for its shares.

DMMs are supposed to add a human touch to stock exchange trading in today’s electronic markets. In contrast, the Nasdaq Stock Exchange, the second-biggest venue for U.S. equities, doesn’t have DMMs for its listed companies and trading is instead completely electronic.

Famous for wearing distinctive blue-colored jackets on the floor of the NYSE, DMMs used to be known as “specialists” back in the day. There used to be dozens of specialist firms in the 1980s, but these days there are just a handful of DMMs active on the NYSE floor.

The Takeaway

Market makers are intermediaries who provide prices all day in two-sided markets, where both bids to buy and offers to sell are quoted. Instead of making long-term bets on whether an asset will rise or fall, they make money from holding on to assets for short periods and profiting off their tiny bid-ask spreads. Market makers rely on high volumes in order to generate significant revenue.

Market makers are also sometimes called high-frequency traders because they use ultra-fast technology and algorithms to connect to multiple exchanges and quote numerous prices continuously. They’re considered important participants in modern financial markets because they speed up the pace at which transactions take place, particularly in stock and equity options trading.

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

FAQ

What do market makers do in the stock market?

Market makers continuously provide prices for buying and selling assets, helping to ensure liquidity and market stability.

How do market makers generate profits?

Market makers earn profits through the bid-ask spread, a small margin between buying and selling prices.

What is a designated market maker?

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

SOIN-Q225-136

Jun

2025

Understanding the Permanent Portfolio Strategy

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is the Permanent Portfolio?
Building a Permanent Portfolio
Alternatives to the Permanent Portfolio
FAQ

The permanent portfolio investment strategy involves creating an investment portfolio that is equally diversified among four asset classes. It was introduced by investment advisor Harry Browne in his 1981 book, Inflation-Proofing Your Investments. The goal of the permanent portfolio is for it to perform well during both economic booms and recessions.

It aims to provide both growth and low volatility. Historically the strategy has been successful. But engaging in the strategy requires a bit of legwork, like learning how to build the portfolio, and considering the pros and cons of the strategy.

Key Points

• A permanent portfolio strategy includes investments in U.S. stocks, Treasury bills, long-term Treasury bonds, and gold to form the four equally diversified asset classes.

• The strategy hopes to generate returns across different economic environments.

• The strategy was designed with the goal of achieving steady growth while maintaining low volatility.

• Annual rebalancing is necessary with the permanent portfolio to keep each asset class at a 25% allocation.

• The conservative nature of the permanent portfolio may result in lower returns compared to more stock-heavy portfolios.

What Is the Permanent Portfolio?

The permanent portfolio is diversified equally with precious metals, Treasury bills, government bonds, and growth stocks. The allocation is as follows:

• 25% U.S. Stocks

• 25% Treasury Bills

• 25% Long-Term Treasury Bonds

• 25% Gold

Although these investments can be volatile and incur losses, their values are not strongly correlated, so by holding some of each, investors may be able to prevent significant losses. The idea is that at least one asset in the portfolio is always working. Each asset class tends to (but does not necessarily) perform well in different conditions:

• Stocks tend to perform well during times of economic prosperity and are good for growth.

• Gold tends to protect from currency devaluations, perform well during inflation, and do fine during growth periods.

• Bonds are a safe investment that perform well during deflationary times and do fine during growth periods.

• Cash might protect from losses during recessions and deflationary times, and is liquid.

Gold and bonds are generally safe havens during a recession and inflationary times, while the stock market provides growth during economic booms. Cash is stable and creates a source of funding for rebalancing and downturns.

Another way of looking at it is by categorizing the four asset classes into four economic conditions:

• Prosperity: Stocks perform well during prosperous times, as public sentiment is positively correlated to stock market increases.

• Inflation: Gold investments perform well during inflationary times because the purchasing power of the dollar decreases, so people flock to gold as a safe haven.

• Deflation: When the price of goods and services decreases, deflation occurs. Long-term bonds perform well in this environment because interest rates decrease, which increases the value of older bonds.

• Recession: Cash is good to hold during a recession while other assets are at a low. Investors can buy up assets while they’re down and still have some money on hand if they need it.

Rather than trying to time the market and moving funds around accordingly, the permanent portfolio is a simple set-it-and-forget-it strategy for long-term investing.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

Historical Performance

The permanent portfolio has historically performed as it’s designed to. It grows steadily over time and doesn’t experience significant losses during market downturns. For example, during the 1987 market crash, utilizing the permanent portfolio would have only incurred losses of 4.5%, while a 60/40 portfolio would have dropped 13.4%.

In general, the permanent portfolio has a somewhat lower return than a 60/40 portfolio, but it carries less risk and volatility.

The permanent portfolio had an average annual return of 8.69% between 1978 and 2017, while the 60/40 portfolio earned 10.26%, and the 100% U.S. stock portfolio earned 11.50%. Within that time frame, the permanent portfolio outperformed the other two several times within five-year periods.

Note, of course, that historical performance is not indicative of future performance.

Pros of the Permanent Portfolio

There are several upsides to building a permanent portfolio:

• Simple, set-it-and-forget-it strategy. Once it’s set up, investors only need to rebalance their portfolio about once a year.

• Avoiding significant losses through diversification while gaining returns over time. The portfolio is designed to minimize volatility but still increase in value over the long term.

• Although assets such as stocks can grow significantly, they can also have significant downturns.

Cons of the Permanent Portfolio

Like any investment strategy, the permanent portfolio does come with some downsides:

• Stocks tend to grow more over time than the other assets included in the portfolio, so investors miss out on some of that growth by only having a 25% stock allocation.

• The permanent portfolio includes only U.S. stocks, so investors miss out on exposure to emerging markets and international stocks. When Browne developed the permanent portfolio, international stocks were not a popular investment, so he would not have included them in his allocation.

• Another potential con is that the permanent portfolio only includes Treasury bonds. Other types of bonds can also be good choices for diversification.

• Although cash is a fairly safe asset to hold during a depression, that type of downturn doesn’t happen often. By holding such a large amount of cash, investors miss out on growth opportunities.

• Overall, the permanent portfolio is fairly conservative, so investors could see higher returns using another strategy. Allocating more to stocks and alternative investments is likely to provide greater growth, but will carry greater risk.

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

Building a Permanent Portfolio

Although the permanent portfolio strategy outlines the percentage of funds to allocate to different asset classes, investors still need to select specific assets to invest in. For example, investors might choose individual stocks for their portfolio, or they might invest in ETFs that include solely U.S. stocks or bonds. The upside of ETFs is they are easy to buy and sell, they minimize fees, and they provide diversification.

Managing a permanent portfolio is fairly simple once it’s set up. It’s a good idea to rebalance the portfolio at least once a year to ensure that the 25% allocations remain the same. If one area of the portfolio has grown or declined, investors can rebalance to even them out.

The Variable Portfolio

Some investors may decide that the permanent portfolio is too safe for them and they’d prefer a strategy conducive to higher growth. Using the variable portfolio method, investors put 5% to 10% of their money into riskier or more experimental investments. That way, the majority of holdings are still in the steady growth permanent portfolio, but investors can play around with some alternative investments as well.

Alternatives to the Permanent Portfolio

Although the permanent portfolio has its merits and has performed well historically, it isn’t the right choice for everyone. Some investors might want to allocate more of their portfolio to stocks, while others might want to diversify into more types of assets. There are many investing strategies out there to choose from, or investors can create their own.

Just because a particular strategy has performed well in the past doesn’t mean it will continue to do so in the future. It’s important for investors to do their own research and due diligence to decide what works best for their own goals and risk tolerance.

Below are some of the most popular strategies:

60/40

The 60/40 strategy is popular, especially among retirees, because it has performed well over the past century.

It involves creating a portfolio with 60% stocks and 40% bonds. Similar to the permanent portfolio, the 60/40 gives investors exposure to the growth of the stock market while reducing risk and volatility with the inclusion of bonds.

The benefit of the 60/40 strategy compared to the permanent portfolio is that it has a large stock allocation, but some still consider the 40% bond allocation too high. There has also been discussion in recent years about whether the 60/40 portfolio will continue to be a successful strategy in the coming decades.

There are downsides, too, which include the fact that a 60/40 portfolio will likely not provide the same returns as one more invested in stocks. Depending on your specific investing goals, that’s something to keep in mind. It’s also possible that stock and bond values could decline at the same time, leading to a fall in the overall value of the portfolio.

Business Cycle Investing

Those looking for an intermediate-term strategy might want to use the business cycle investing strategy for some or all of their portfolio. Using this strategy, investors keep track of the business cycle and adjust their investments according to which stage of the cycle the nation is in.

Different industries and types of assets do better within each stage of the cycle, so investors can make predictions about when to buy and sell each asset and invest accordingly. To execute this strategy effectively, it is a good idea to have an understanding of past market contractions and their catalysts. This strategy requires more time, research, and effort than long-term, set-it-and-forget-it strategies, but can be successful for those willing to put in the work.

It could be unsuccessful if investors aren’t able to stay on top of the news and happenings related to the business cycle, and are able to readjust their holdings and allocations accordingly. It requires a more active approach, in other words, which may not be suited for each individual investor.

Rule of 110

Investors subtract their age from 110 to figure out what percentage of their money to allocate to stocks and bonds. For example, a 40-year-old would create a portfolio of 70% stocks and 30% bonds. As the investor gets older, they rebalance their portfolio accordingly.

Dollar-Cost Averaging

Here, investors put the same amount of money toward any particular asset at different points in time. Rather than putting all of their money into the markets at once, they space it out over time. Utilizing the dollar-cost averaging strategy allows investors to average out the amount they pay for that asset over time. Sometimes they buy low and sometimes they buy high, but they aren’t attempting to time the market or predict what will happen.

Lump Sum Investing

With the most basic strategy of all, investors put all of their available cash into the stock market right away. There’s no waiting for a particular time or trying to figure out what else to invest in. The theory behind this is that the overall trend line of the stock market continues to go up over the long term, even if it has downturns along the way. This might be a choice for investors who simply want to take advantage of stock market growth and aren’t afraid of volatility.

Alternative Investments

In addition to stocks and bonds, investors may want to consider diversifying into alternative investments, which could include real estate, franchises, or farmland. While some alternative investments carry a lot of risk and require research, they can also come with significant growth. Conversely, alternative investments tend to be very risky and speculative, and could see significant losses as well. The risks associated with alternative investments are something all investors should consider.

The Takeaway

The permanent portfolio involves equally allocating your investments to four specific asset classes. Those classes include precious metals, Treasury bills, government bonds, and growth stocks. While this method has proven beneficial for some investors in the past, it has its potential downsides, and won’t be the right strategy for everyone.

Once you’ve decided what your investing strategy is going to be and created some personal financial goals, you’re ready to start building your portfolio.

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

FAQ

How is the permanent portfolio allocated?

The permanent portfolio is diversified equally with precious metals, Treasury bills, government bonds, and growth stocks. Each asset class gets 25% within the permanent portfolio.

Who invented the permanent portfolio strategy?

The permanent portfolio strategy was introduced by investment advisor Harry Browne in his 1981 book, Inflation-Proofing Your Investments, with the goal of the permanent portfolio is for it to perform well during both economic booms and recessions.

What are some alternate strategies to the permanent portfolio?

Some potential alternatives to the Permanent Portfolio strategy that investors may check out include the 60/40 strategy, lump-sum investing, or the Rule of 110.

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

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

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

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

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
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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.

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

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If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.
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SOIN-Q225-151

Jun

2025

Investing in Retail Stocks

By Stacey Leasca | Growing Wealth, invest, Investing | Comments Off

Table of Contents

How to Invest in Retail Stocks
Changes in the Retail Industry
Looking at Retail Stock Metrics
Possible Risks of Investing in a Retail Stock
FAQ

When a consumer walks into a favorite store and spends money there, they might wonder if they should invest in that brand. Enter: retail stocks, or shares of companies that sell everything from clothing, books, computers, homeware, tools, groceries to auto parts.

It may feel like a good idea to invest in retail stocks because we’re familiar with their stores, the products, and understand the brand identities. However, retail investing can actually be tricky, especially in today’s ecosystem. Retail companies have dealt with a lot in recent years: shifting consumer preferences, the rise of online shopping, a slew of store closures, trade wars, a global pandemic that brought about quarantine measures.

Key Points

• Retail stocks represent companies selling various goods to consumers.

• Visits to retailers’ physical stores may offer insights into company health.

• Online sales often outpace in-store purchases, especially during holidays.

• Metrics like same-store sales, margins, and inventories are crucial for evaluating stocks.

• Retail stocks tend to be volatile and cyclical, influenced by economic conditions.

How to Invest in Retail Stocks

First, investors need to check to see if the retail company is public. Being public means shares of the business are available for any investor to buy in the stock market. They can do this by looking up the company’s stock ticker symbol on the internet or via their brokerage account. For those who just want exposure to the industry as a whole, they can find a retail-stock exchange-traded fund, or ETF.

Typically, retail companies go public in order to raise additional funds that are used to open more stores, expand overseas, invest in their e-commerce platform, or buy another retail company.

As a stockholder in a retail company, the investor holds a partial ownership, or a share, of the business. The owner of a stock is also entitled to dividends the company may disburse, and benefit from any potential increase in its share price. They also have the right to participate in shareholder votes.

Being a retail investor isn’t for the faint of heart. It takes a lot of due diligence. Investors should read quarterly earnings reports the company makes, monitor for any additional announcements the company makes related to company performance or new products, and pay attention to management changes like a new CEO or CMO.

It also takes an investor who isn’t afraid of a little volatility. Retail stocks can be particularly turbulent when reporting earnings for the back-to-school or holiday seasons — when many companies make a majority of their sales.

Recommended: Reading an Earnings Report

Changes in the Retail Industry

Remember back in the day when the mall was the place everyone went to hang out or go shopping? That reality has shifted radically with the advent of ecommerce. Consumers have increasingly migrated online to make their purchases, and retail companies have had to change alongside them.

Take holiday spending, the most important season for many retailers. Online spending has continued to outpace in-store spending, with the gap widening in recent years due to mobile spending.

In some cases, the e-commerce revolution has changed the stores along Main Street or malls into more of a marketing tool, rather than a first point of sale. Over the last few decades, stores have had to adapt to create exclusive consumer experiences only found in-store.

However, some digital-native brands have gone the opposite way, starting online and then opening physical stores. Examples include Warby Parker, Amazon, Allbirds, Skims, and Away, among others.

Looking at Retail Stock Metrics

Here are some ways investors can evaluate whether to invest in a public retail company:

• Visit a few physical locations. This way, an investor can get a sense of what’s happening on the ground. Is the store selling timely merchandise? Is the store well lit and laid out? Is there a lot of foot traffic? All of these are important ways an investor can try to gauge a company’s health.

• Visit the store’s online platform. If the store’s e-commerce operation seems strong, it is easy to navigate and offers customer service. This, too, points to the good health of a company.

• Next, it’s time to dig deeper into the company’s finances. Some measures that can be particularly helpful to retail investors include comparable store sales–also known as same-store sales. These are sales trends of stores that have been open at least one year.

• Also examine margins, or how much the revenues a company makes after subtracting the cost of goods sold (COGS), and inventories, or how much in goods the company has stocked. Too much inventory can signal slow sales, while too little may be a sign of operational or production issues down the road. These numbers may fluctuate depending on the season.

• Use traditional valuation metrics, such as price-to-earnings ratio or price-to-sales ratio. Public retail companies are required to report net income and revenue figures, which investors can use to gauge how expensive or cheap the shares are trading at.

Pay attention to broader industry trends by looking at earnings of competitors or changes in e-commerce trends. The National Retail Federation (NRF) could also be a good resource for information.

Possible Risks of Investing in a Retail Stock

Like all investments, retail stocks can come with risks. Take the global pandemic, which led to a quarantine across many cities in the world in 2020, causing consumers to be stuck at home and be wary of visiting stores.

Here are some of the other ways the industry can be vulnerable:

• Retail stocks can be highly cyclical, or tied to economic conditions. In a recession, non-essential purchases may be the first to go for many consumers and may cause an otherwise healthy retail store to sink. Investors may benefit from balancing their portfolio with non-cyclical companies, like utility, telephone or health-care stocks.

• Retailers are often at the mercy of changing regulations. This could include rising minimum wages or regulation changes in a supply chain.

• Retail stocks are also often at risk of consolidation. The retail industry is shrinking in some ways, with larger players constantly buying or swallowing up smaller companies. This causes a rapidly changing landscape that must be monitored at all times.

The Takeaway

Retail businesses can be volatile stock investments, going up and down with the seasons, along with changes in consumer confidence. Furthermore, the e-commerce and mobile phone revolution has added pressures to the retail financial landscape.

Investing in retail stocks involves keeping tabs on how brands are dealing with shutting malls, building digital platforms and changing expectations among consumers. Investors can also benefit from understanding more retail-specific metrics like same-store sales, margins and inventories. They can also use traditional valuation measures like P/E or P/S ratios.

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

FAQ

What are retail stocks?

Retail stocks are shares of retail companies, which could include brands or chains that sell consumer products in physical locations or online. Examples of retail products include sporting goods, food, books, hardware, and more.

What are some risks involved with retail stocks?

Investing in retail stocks involves risks such as the cyclical nature of the retail industry, potential for changing regulations, and risks of consolidation.

What are some ways to invest in retail companies?

Investors can buy shares of retail companies, or even ETFs or index funds that are focused on the retail sector. There may be other ways to invest, too, such as through corporate bonds.

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

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Jun

2025

What Is the Difference Between Trading Halts and Trading Restrictions?

Trading Halts vs Other Trading Restrictions

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

Stock exchanges and financial regulators sometimes impose different types of trading restrictions on individual stocks, including short-term halts or delays, and occasionally longer-term suspensions.

In cases of unusual volatility, financial authorities may halt the trading of all securities, by using a fail-safe measure known as market-wide circuit breaker (MWCB).

Generally speaking, though, more common reasons for trading restrictions include mitigating the impact of company news that could impact a stock’s price, significant economic or global events that impact that security (or the market as a whole), or because there’s a technical problem impacting trades.

The Securities and Exchange Commission (SEC) can restrict the trading of a particular security for up to 10 days, often because the company hasn’t filed the requisite reporting documents.

These trading restrictions can impact listed stocks (those listed on U.S. stock exchanges), as well as over-the-counter (OTC) stocks, which are not traded on public exchanges.

Key Points

• Stock exchanges and regulatory bodies may have reason to impose short- or long-term trading restrictions under various conditions.

• A short-term trading halt usually lasts no more than an hour, and is resolved during the trading day. A delay is usually a brief pause before markets open.

• The SEC can impose a trading suspension for up to 10 days.

• A common reason for a trading suspension is that a company hasn’t maintained its regular reporting to the SEC.

• A trading halt may be applied to a single security or market sector, but a full interruption of trading across markets is also possible.

What Is the Difference Between a Trading Halt and a Trading Restriction?

A trading halt is a short-term pause in which the trading of a particular security is temporarily suspended. These are known as regulatory halts. While a trading halt may occur at any point during the trading day, a trading delay is usually imposed at the market’s open.

A trading suspension is a longer-term restriction on trading a certain security, up to 10 days, enforced by the SEC.

For listed stocks, trading halts and delays are typically put in place by stock exchanges themselves, usually in response to company news that could impact trading outcomes.

OTC stocks, which are not listed on traditional exchanges like the NYSE or Nasdaq, are regulated by FINRA. So FINRA would institute a halt or delay if there were a material reason to pause trading.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

What Is a Trading Halt or Delay?

A trading halt pauses trading for a short period of time, usually less than an hour. Typically the halt occurs in response to company news or announcements affecting a product, company leadership, or other significant news that could change a stock’s price positively or negatively.

A stock exchange can also interrupt trading of a certain security if it deems that the stock does not meet, or no longer meets the criteria for being listed on the exchange.

A trading delay can be imposed by an exchange when a company has revealed significant news after the trading hours of 4 p.m. to 9:30 a.m. Eastern Time — which is often when companies make important announcements.

The idea is to give investors time to absorb the news, and ideally avoid volatile trading.

When an exchange imposes a halt on a certain security, other exchanges that list that stock also respect the halt or delay.

Trading halts are artificial, meaning they are not a natural part of markets — however, they have been in existence for some time. Stock market halts date back to 1987, when the SEC mandated the creation of market-wide circuit-breakers (MWCBs) to prevent a repeat of the Oct. 19, 1987 market crash, also known as “Black Monday,” which was one of the worst days in the history of the stock market.

Reasons for Trading Halts

Trading halts are a means of interrupting market action to prevent volatility from snowballing in response to unexpected stimuli. Halts are implemented for a variety of reasons, including the following.

1. Anticipation of a Major News Announcement

A trading halt might be called during the day to allow a company to make an announcement. As noted, if the announcement is pre-market, it might result in a trading delay rather than a halt, prior to the market’s open. A trading halt or delay allows investors time to absorb the news without reacting.

2. Severe Price Fluctuations

Exchanges may also impose trading halts based on stock volatility, applying to both upside and downside swings in short amounts of time. Whereas news-induced trading delays could be an hour in duration, trading of a certain stock can also be halted when price fluctuations trigger the Limit Up/Limit Down Plan (LULD).

The LULD parameters are designed to halt trading when a stock’s price moves too quickly outside certain price bands. These bands are calculated on a rolling basis, to capture higher- or lower-than-average price movements over five-minute intervals. If a stock enters the so-called limit state (i.e., it hits either the upper or lower end of its range), and doesn’t move within 15 seconds, trading is paused for five minutes.

3. Market-Wide Circuit Breakers

There are also three tiers of market-wide circuit breakers that pause trading across all U.S. markets when the benchmark indices the S&P 500, the Dow Jones 30, and the Nasdaq exceed pre-set percentages in terms of price from the prior day’s closing price:

• Level 1: 15-minute halt when the S&P 500 falls 7% below the previous day’s closing price between 9:30 am ET and 3:24 pm ET.

• Level 2: 15-minute halt when the S&P 500 falls 13% below the previous day’s close between 9:30 am ET to 3:24 pm ET. Level 1 and 2 circuit breakers do not halt trading between 3:25 pm ET and 4:00 pm ET.

• Level 3: Trading is closed for the remainder of the day until 4 pm ET when the S&P 500 falls 20% below the previous day’s close.

4. Correct an Order Imbalance

Non-regulatory halts or delays occur on exchanges such as the NYSE when company news — particularly when released after hours — has a disproportionate impact on the pending buy and sell orders.

When this occurs, trading is halted or delayed, market participants are alerted to the situation, and exchange specialists communicate to investors a reasonable price range where the security may begin trading again on the exchange.

However, a non-regulatory trading halt or delay on exchange does not mean other markets must follow suit with this particular security.

5. Technical Glitch

Trading is halted when it’s determined that unusual market activity such as the misuse or malfunction of an electronic quotation, communication, reporting, or execution system is likely to have a significant impact.

6. Regulatory Concerns

A trading halt may be placed on a security when there is uncertainty over whether the security meets the market’s listing standards. When this halt is placed by a security’s primary markets, other markets that offer trading of that security must also respect this halt. These include:

• SEC Trading Suspension: A five-minute trading halt for a stock priced above $3.00 that moves more than 10% in a five-minute period. These are commonly imposed by the SEC onto penny stocks and other over-the-counter stocks suspected of stock promotion or fraud.

• Additional Information Requested: A trading halt that occurs when a stock has rallied significantly without any clear impetus. This can be common among orchestrated pump-and-dumps or short squeezes. In many cases when the halt is lifted, the stock reverts back down because there are no underlying fundamentals supporting the dramatic rise in price.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

How Long Do Trading Halts Last?

Trading halts are typically no longer than an hour, the remainder of the trading day, or on rare occasions up to 10 days. However, if the SEC deems appropriate, the regulatory body may revoke a security’s registration altogether.

Example of Trading Halts

While most trading halts don’t make headlines, there are a few that investors may remember.

Pending News

In February of 2025, medical device company Know Labs, Inc. (KNW) announced that its trading suspension had been lifted by NYSE American. The trading suspension had been imposed on the company’s common stock, owing to the company’s need to meet compliance standards for listing on the NYSE American exchange (in this case the stock price was found to be above the low-selling threshold for listing on the exchange).

Stock Volatility

Amid the well-known Gamestop vs Wall Street meme stock spectacle in 2021, Gamestop’s stock (GME) saw huge capital inflows over the course of a couple of weeks, leading the NYSE in terms of daily volume. The stock’s intraday volume was so high that it triggered the volatility circuit breaker dozens of times over the last week of January and again on February 2, 2021, when it dropped 42%.

Technical Issues

In early June of 2024, the trading of some 40 ticker symbols on the NYSE, including Berkshire Hathaway Class A shares, were temporarily halted owing to pricing data issues that stemmed from a technical glitch attributed to a new software release. Trading resumed after a couple of hours.

Market-wide Circuit Breakers (MWCBs)

MWCBs were triggered four times in March 2020 in response to the global COVID-19 pandemic lockdowns that caused two of the six largest single-day drops in market history. This was the first occurrence of market-wide circuit breakers since 1997.

The Takeaway

Trading halts, delays, and suspensions are similar, but halts and delays are generally shorter — and are the result of intervention by a stock exchange or FINAR. Trading suspensions are generally put in place by the SEC.

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

FAQ

Is a trading halt a good thing?

Generally speaking, the intention of a trading halt is to protect investors, as well as companies, from the impact of significant news events on a stock’s price — or if there’s evidence of non-compliance, fraud, or technical issues. In rare cases, an exchange may halt trading when there’s a major event, such as a natural disaster.

What happens when trading is halted?

A typical trading halt occurs during the course of the trading day (usually 9:30 a.m. to 4 p.m. Eastern Time). This is a temporary interruption of the trading of a single security, and usually it lasts no more than an hour. It may follow a company news announcement, or it may occur after news is released.

What’s the difference between a halt and a suspension?

A trading halt is a temporary pause relating to company news (or factors that could lead to market volatility), and it’s imposed by a stock exchange or by FINRA (in the case of over-the-counter stocks). A suspension is longer-term — up to 10 days — where a stock is removed from trading owing to non-compliance with SEC rules or other regulatory issues.

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

SOIN-Q225-044

Investing in Chinese Stocks

Can You Invest in Chinese Stocks?

What Are the Best Chinese Stocks to Buy?

How Can Foreigners Invest in the Chinese Stock Market?

Pros & Cons of Buying Chinese Stocks

Pros of Buying Chinese Stocks

Long-term Time Horizon

China’s Response to the COVID-19 Pandemic

International Diversification

Cons of Buying Chinese Stocks

Delisting of Some Chinese Companies

Growth Limits

Are Chinese Stocks Undervalued?

The Takeaway

FAQ

Can American investors invest in Chinese stocks?

What are the risks of investing in Chinese stocks?

Why might investors find Chinese stocks attractive?

What Is a Market Maker?

How Market Makers Work

How Market Makers Earn Money

Overview of Bid-Ask Spreads

Overview of Payment for Order Flow

What Are Designated Market Makers (DMMs)?

The Takeaway

FAQ

What do market makers do in the stock market?

How do market makers generate profits?

What is a designated market maker?

Understanding the Permanent Portfolio Strategy

What Is the Permanent Portfolio?

Historical Performance

Pros of the Permanent Portfolio

Cons of the Permanent Portfolio

Building a Permanent Portfolio

The Variable Portfolio

Alternatives to the Permanent Portfolio

60/40

Business Cycle Investing

Rule of 110

Dollar-Cost Averaging

Lump Sum Investing

Alternative Investments

The Takeaway

FAQ

How is the permanent portfolio allocated?

Who invented the permanent portfolio strategy?

What are some alternate strategies to the permanent portfolio?

Investing in Retail Stocks

How to Invest in Retail Stocks

Changes in the Retail Industry

Looking at Retail Stock Metrics

Possible Risks of Investing in a Retail Stock

The Takeaway

FAQ

What are retail stocks?

What are some risks involved with retail stocks?

What are some ways to invest in retail companies?

Trading Halts vs Other Trading Restrictions

What Is the Difference Between a Trading Halt and a Trading Restriction?

What Is a Trading Halt or Delay?

Reasons for Trading Halts

1. Anticipation of a Major News Announcement

2. Severe Price Fluctuations

3. Market-Wide Circuit Breakers

4. Correct an Order Imbalance

5. Technical Glitch

6. Regulatory Concerns

How Long Do Trading Halts Last?

Example of Trading Halts

Pending News

Stock Volatility

Technical Issues

Market-wide Circuit Breakers (MWCBs)

The Takeaway

FAQ

Is a trading halt a good thing?

What happens when trading is halted?

What’s the difference between a halt and a suspension?

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