Growing Wealth Archives

May

2025

Tips on Evaluating Stock Performance

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

Evaluating stock performance is not an exact science, and there are many factors, indicators, and tools that investors have at their disposal. However, it can be easy to get overwhelmed by the amount of information, charts, and choices available. After all, no amount of analysis can truly make accurate predictions about stock performance.

With all this in mind, for most investors, using a few simple strategies to evaluate stocks can provide a good understanding in order to help make an investment decision. Every investor has their own goals, investing and diversification strategies, and risk tolerance, so it’s beneficial for each person to come up with their own stock evaluation strategy.

Key Points

• Evaluate total returns over various periods to assess stock performance.

• Compare stock performance to market indexes for relative performance.

• Analyze company revenue and earnings for financial health.

• Use financial ratios like P/E, PEG, and ROE for deeper insights.

• Consider dividends and inflation impact on overall returns.

Evaluating Stock Performance

Stock evaluation can involve both quantitative and qualitative analysis. Quantitative analysis involves looking at charts and numbers, whereas qualitative analysis looks into industry trends, competing firms, and other factors that can affect a stock’s performance. Both forms of analysis provide valuable information for investors, and they can be used in tandem to come up with a comprehensive picture of performance.

Here are a few key steps investors can take to evaluate stock performance or to analyze a stock.

Total Returns

One of the most important metrics to look at when evaluating a stock’s performance is the total market return over different periods of time. A stock may have increased significantly in value within the past few days or months, but it could still have lost value over the past year or five years.

Investors may want to consider how long they plan to hold a stock and look into each stock’s historical performance. Some common periods to look at are the past year (52 weeks), the year to date (YTD), the five-year average return, and the 10-year average return. Investors can also look at the average annual return of a stock.

Every investor has different goals and expectations for returns. One investor might be happy with a 3% return over five years, while another might not be.

Using Indexes

Another step investors may want to take to evaluate a stock’s performance is comparing it with the rest of the stock market. A stock might seem like an attractive investment if it has had a 7% return over the past 52 weeks, but if the rest of the stock market has increased by more than that, there might be a better choice.

A single stock can be compared to the overall stock market using stock indexes. Indexes show averages of the market performance of a handful or even hundreds of stocks. Index performance metrics show how any particular stock compares to the broader market. If a stock has been performing similarly or better than the market, it may be a good investment.

Looking at Competitors

An additional way investors might consider evaluating a stock’s performance is by comparing it to other companies within the same industry. One might discover that an entire industry is doing well in the current market, or that another stock within the industry would actually be a better investment. There are numerous industries and market sectors.

Not every company within an industry will be a good comparison, so it’s best to look at companies of a similar size, those that have been around for a similar amount of time, or that have other similarities. Even if a giant, established corporation offers a similar product or service to a small startup, they may not be the best two stocks to compare within an industry.

Two questions investors might consider asking are:

• Does the company have a competitive advantage? If the company has a unique asset or ability, such as a patent, a new research or manufacturing method, or great distribution, it may be more likely to succeed within the industry.

• What could go wrong? This could be anything from poor management to a new form of technology making a company irrelevant. Nobody can predict the future, but if there are any red flags it’s important to pay attention to them.

Reviewing Company Revenue

Looking at stock returns is useful, but it’s also a good idea to look into the actual revenue of a company through its profit and loss statement, orearnings reports. Stock prices don’t necessarily follow a company’s revenue, but looking at revenue gives investors an idea about how a company is actually performing.

Like stock returns, investors can look at revenue over different periods of time. Revenue is categorized as operating revenue and nonoperating revenue. Operating revenue is more useful for investors to look at because non-operating revenue can include one time events such as selling off a major asset.

Using Stock Ratios in Evaluations

There are several financial ratios that can be used to evaluate a stock and find out whether it is currently under or overpriced in the market. These ratios can help investors gain an understanding about a company’s liquidity, profitability, and valuation. Here are some of the most commonly used ratios.

Price to Earnings (P/E) Ratio

The most popular ratio for evaluating stock performance is the price to earnings ratio, or P/E ratio, which compares earnings per share to the share price. P/E is calculated by dividing stock share price by the company’s earnings per share. It’s important because a stock’s price can shoot up based on good news, but the P/E ratio shows whether the company actually has the revenues to back up that price. One can compare the P/E ratios of companies in the same industry to see which is the best investment.

There are two different ways to calculate P/E. A trailing P/E ratio can be calculated by dividing current stock price by earnings per share. A forward P/E ratio is a prediction that can be calculated by dividing stock price by projected earnings.

Price to Earnings Growth (PEG) Ratio

P/E is a useful ratio, but it doesn’t take growth into account. PEG looks at earnings, growth, and share price all at once. To calculate PEG, divide P/E by the growth rate of the company’s earnings. If the PEG is higher than 2, the stock may be overpriced, but if it’s under 1, the stock may be underpriced.

Price to Sales (P/S)

The price-to-sales ratio is calculated by dividing the company’s market capitalization by its 12-month revenue. If the P/S is low in comparison to competitors, it may be a good stock to buy.

Price to Book (P/B)

The P/B ratio looks at stock price compared to the book value of the company. The book value includes assets such as property, bonds, and equipment that could be sold. Essentially, the P/B looks at what the value of the company would be if it were to shut down and be sold immediately. This is useful to know because it shows the value of a company in terms of assets, rather than valuing it based on growth.

If the P/S is low, the stock may be a good investment because the stock might be underpriced.

Dividend Yield

Dividend yield is calculated by dividing a stock’s annual dividend amount by the current price of the stock. This gives investors the percentage return of a stock’s price. If the dividend yield is high, this means an investor may earn more cash from the stock. However, this can change at any time so isn’t a good long-term indicator.

Dividend Payout

The dividend payout ratio tells investors what percentage of company profits get paid out to shareholders. Companies that don’t pay out dividends or pay low dividends are likely reinvesting their profits back into the business, which could help the business continue to grow. Paying out dividends isn’t a negative thing, but if a company pays out high dividends, they will have less money to reinvest and may not be able to continue to grow.

Return on Assets (ROA)

The ROA ratio compares a company’s income to its assets, which gives investors an indicator of how they handle their business.

Return on Equity (ROE)

ROE provides a calculation of how much profit a company makes with every dollar that shareholders invest. To calculate ROE, divide a company’s net income by shareholder equity. This gives an indication of how a company handles its resources and assets. However, as with every calculation, ROE doesn’t always provide a full and accurate picture of a stock’s performance. Companies can temporarily boost their ROE by buying back shares, which lowers the amount of equity held by shareholders.

Profit Margin

Profit margin compares a company’s total revenues to its profits. If a company has a high profit margin, this shows that a company is good at managing expenses, because they are able to keep revenue rather than spending it.

Current Ratio

The current ratio is calculated by dividing a company’s current assets by its current liabilities. This shows if a company will have enough money to pay off its debts. Current assets include cash and other highly liquid property. Current liabilities are any debts that a company must pay within one year.

Earnings Per Share (EPS)

This ratio is just what it sounds like, how much profit is a company generating per share of stock. A high EPS is a positive indicator. It’s a good idea for investors to look at EPS over time to see how it changes, because EPS could be boosted in the short term if a company has cut costs.

EPS is also useful for comparing different companies, since it gives a quick indication of how well each stock is doing. However, EPS doesn’t give a full picture of how a company is doing or how they manage their money, because some companies pay out earnings in the form of dividends, or they reinvest them back into the business.

Debt-to-Equity Ratio

Even if a company is growing and earning more profit, they could be doing so by getting into more and more debt. This could be a bad sign if they become unable to pay back their debts or if borrowing becomes more difficult. An ideal debt equity ratio is under 0.1, and over 0.5 is considered to be a bad sign.

Additional Factors

Aside from all the tools above, there are other factors to consider when evaluating a stock.

• Dividends: If a stock pays dividends, investors may want to consider how those payments affect the overall returns of the stock.

• Inflation: Factoring in how much inflation will affect stock returns is another helpful factor. This can be done by subtracting inflation amounts from a stock’s annual returns.

• Analyst Reports: Another resource available to investors is Wall Street analyst reports put together by professional analysts. These can give in-depth insights into the broader market as well as individual companies.

• Historical Patterns: Looking at past trends to get a sense of what the market might do in the coming months and years can help investors make informed decisions. Past trends aren’t predictions for the future, but they can still be useful.

The Takeaway

There are many tools available to help investors who are just getting started researching stocks and building a portfolio, and there’s no right or wrong way to evaluate stock performance. It can take a lot of time to gather information and research stocks, but investors can use tools to see everything at once and make quicker, more informed investment decisions.

If you’re ready to put your evaluation skills to the test, you can start investing in stocks and other securities to see if you’re on-point. But be aware that investing always involves risk.

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

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

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

SOIN-Q225-010

May

2025

overhead view of businessman working, looking at business charts and graphs

What Is the Wash-Sale Rule?

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

A wash sale occurs when an investor sells a security at a loss, and buys a very similar security within a 30-day window of the sale (30 days before or after). The wash-sale rule is an Internal Revenue Service (IRS) regulation that states an investor can’t receive tax deduction benefits if they sell an investment for a loss, then purchase the same or a “substantially identical” asset within 30 days before or after the sale.

While investors may find themselves in a position in which it may be beneficial to sell securities to harvest losses, it’s important to understand the wash-sale rule and how it works.

Key Points

• Selling a security at a loss and repurchasing it within 30 days triggers the wash-sale rule.

• The wash-sale rule applies to stocks, bonds, mutual funds, and ETFs.

• Losses from wash sales cannot be used to offset taxable income.

• The wash-sale rule applies across all accounts, not just one.

• A wash sale can result in a higher cost basis in the new investment.

Which Investments are Subject to the Wash-Sale Rule?

The wash-sale rule applies to most common investments, including:

• Stocks

• Bonds

• Mutual funds

• Options

• Exchange-traded funds (ETFs)

• Stock futures contracts

Transactions in an individual retirement account (IRA) can also fall under the wash-sale rule. The wash-sale rule does not apply to commodity futures or foreign currency trades. The rule doesn’t apply if an investor sells a security that has increased in value and within 30 days buys an identical security. In that case, they will need to pay capital gains taxes on the proceeds.

What Happens When You Trigger a Wash Sale?

Investors commonly choose to sell assets at a loss as part of their tax or day trading strategy, or they may regret selling an asset while the market was down, and decide to buy back in.

The intent of the wash-sale rule is to prevent investors from abusing the tax benefits of selling at a loss, and claiming artificial losses.

In the event that an investor does trigger a wash sale, they will not be allowed to write off the loss when they do their tax reporting to the IRS. This means the investor won’t receive any tax benefit for selling at a loss. The rule still applies if an investor sells an investment in a taxable account and buys it back in a tax-advantaged account, or if one spouse sells an asset and then the other spouse purchases it that also counts as a wash sale.

It’s important for investors to understand the wash-sale rule so that they account for it in their investment and tax strategy. If investors have specific questions, they might want to ask their tax advisor for help.

Recommended: Investing 101 for Beginners

Avoiding a Wash Sale

Unfortunately, the guidelines regarding what a “substantially identical” security is are not very specific. The easiest way to avoid wash sales is to create a long-term investing strategy involving few asset sales and not trying to time the market. Creating a diversified portfolio is generally a good strategy for investors.

Another important thing to keep in mind is the wash-sale rule applies across an investor’s accounts. As such, investors need to keep track of their sales and purchases across their entire portfolio to try and make sure that the wash-sale rule doesn’t affect any investment choices.

What to Do After Selling an Asset at a Loss

The safest option is to wait more than 30 days to purchase an asset after selling a similar one at a loss. An investor can also invest funds into a different asset — a different enough asset, that is — for 30 days or more and then move the funds back into the original security after the wash sale window has passed.

There are benefits to selling an asset at either a profit or a loss. If an investor sells at a profit, they make money. If they sell at a loss, they can declare it on their taxes to help offset their capital gains or income. If an investor has significant capital gains to report, they may decide to sell an asset that has decreased in value to help lower their tax bill. However, if they hoped to reinvest in an asset later, a wash sale can ruin those plans.

In some cases, simply selling a stock from one corporation and purchasing one from another, different corporation is fine. Even selling a stock and buying a bond from the same company may not trigger a wash sale.

Investing in ETFs or Mutual Funds Instead

If an investor wants to reinvest funds in a similar industry while avoiding a wash sale, one option would be to switch to an ETF or mutual fund. There are ETFs and mutual funds made up of investments in particular industries, but they are often diversified enough that they wouldn’t be considered to be too similar to an individual stock or bond. It’s possible that an investor could sell an individual stock and reinvest the money into a mutual fund or ETF within a similar market segment without violating the wash-sale rule.

However, if an investor wants to sell an ETF and buy another ETF, or switch to a mutual fund, this can be more challenging. It may be difficult to figure out which ETF or mutual fund swaps will count as wash sales, and which won’t.

Wash-Sale Penalties and Benefits

If the IRS decides that a transaction counts as a wash sale, the investor can’t use the loss to reduce their taxable income or offset capital gains on their taxes for that year.

However, there can be an upside to wash sales. Investors can end up with a higher cost basis for their new investment, because the loss from the sale is added to the cost basis of the new purchase. In addition, the holding period of the sold investment is added to the holding period of the new investment.

The benefit of having a higher cost basis is that an investor can choose to sell the new investment at a loss and have a greater loss for tax reporting than they would have. Conversely, if the investment increases in value and the investor sells, they will have a smaller capital gain to report. Having a longer holding period means an investor may be able to pay long-term capital gains taxes on a sale rather than short-term gains, which have a higher rate.

The Takeaway

The wash-sale rule is triggered when an investor sells a security at a loss, but then turns around and buys a similar security within 30 days — either before, or after. It’s a bit of an opaque rule, but there can be consequences for triggering wash sales. That’s why understanding regulations like the wash-sale rule is an important part of being an informed investor.

Part of making solid investing decisions is planning for taxes and understanding what the benefits and downsides may be for any particular transaction. This is just one aspect of tax-efficient investing that investors might want to consider.

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

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

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

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

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

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

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

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

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.

SOIN-Q225-007

May

2025

A woman is working on a laptop and doing calculations on a pile of financial documents with charts and graphs.

How Can Investors Receive Compounding Returns?

By Krystal Etienne | Growing Wealth, invest, Investing | Comments Off

Compound returns refer to the way investment gains can potentially multiply over time. In this way, compound returns can add to your principal. The larger principal amount would potentially see higher gains — helping you to build your wealth, assuming the gains are reinvested.

Compound returns depend on the investment’s rate of return — meaning how much the investment gains or loses value over time. The effects of compounding returns typically occur over a period of years, because most investments see gains and losses; for gains to compound it takes time.

That’s why people are often encouraged to start investing at an early age, even with small amounts. The longer their money is invested, the more compounding it may see.

Key Points

• Compounding is a phenomenon where returns on investment principal can accumulate, and thus potentially see even larger gains over time.

• This is similar to the way compound interest works with some types of bonds.

• Compound returns are not guaranteed in an investment portfolio. Investing includes the risk of loss.

• Stocks that pay dividends offer a type of compounding when reinvested in more of the same stock.

• Types of investments that may see compound returns over time include stocks, certain savings bonds, mutual funds, and exchange-traded funds (ETFs).

What Are Compound Returns?

Returns are the earnings you see on an investment; compound returns are the gains that accumulate on top of those gains, which can accelerate your investment’s growth.

Compound returns can be achieved by any type of asset class that produces returns on both the initial amount–the principal–as well as any profits or returns that are generated after the initial investment. Essentially, the money you put to work is doing additional work automatically for you.

Essentially, the money you put to work is doing additional work automatically for you.

However, in the case where an investor sees a series of losses, that would curtail the compounding process. All investments are subject to the risk of loss.

How Does Compound Interest Work?

Compound interest, on the other hand, refers to interest that accrues on certain types of bonds, which pay a fixed amount of interest in the form of coupon payments, which gets added to the original principal amount.

There isn’t such a thing as compound interest with stocks. But some stocks pay dividends, which can be reinvested in more shares of stock as well — which is also a type of compounding.

The Value of Compound Returns

Here’s a hypothetical example that illustrates the idea of compound returns. (However, be aware that this is only for an investor making profits. In reality, an investor could also experience losses.)

Let’s say an investor buys shares of a stock that costs $1,000. That’s the principal. In the first year, they earn a 10% return. The stock is now worth $1,100. Things start to get interesting in the second year, when the stock increases in value another 10%, bringing the stock’s value to $1,210.

That’s $110 in profit earned in the second year, compared to $100 in the first year. This happened even though the investor did not add any additional money to the investment, and they earned the same rate of return. The investment simply grew over the previous year, creating a larger base from which to earn more.

If the investor were to earn a 10% rate of return the third year, the profit would be even greater than in the previous two years. Working off a larger base — now $1,210 — a 10% return will yield a profit of $121.

But keep in mind that investments like stocks may experience volatility. Take the example from above. Three consecutive years of 10% returns is highly unlikely. In fact, it’s also possible for investors to lose money on their investments, which is the case in almost any asset class.
Recommended: A Beginner’s Guide to Investing in Your 20s

How to Get Compound Returns

With compound returns, the reinvestment of gains may be done automatically or manually.

Here are some examples of investment types that can earn compound returns.

Stocks: First, some stock market basics. There are two ways to make money on a stock. The first is through price appreciation, and the second is through dividend payments, as noted above.

When the value of a stock grows over time, an investor has the potential to see compound returns if those profits are reinvested. With cash dividend payments, compound returns are not automatic — except in the case of a dividend reinvestment plan (DRIP) — as they are paid out in cash, but an investor can add the payouts back in order to potentially earn additional returns.

Mutual funds: Mutual funds are large, pooled portfolios of stocks, bonds, or other securities. For example, a mutual fund could invest in the U.S. stock market by including stocks from a specific index. Over time, the goal is that the mutual fund grows as the underlying investments grow.

Many mutual funds that include dividend-paying stocks give the option of automatic dividend reinvestment plans. This way, the investor can earn compound returns in both ways, on the price appreciation and the dividend payments.

Exchange-traded funds (ETFs): Similar to mutual funds, ETFs are pooled investments, like stocks. As the value of the ETF grows over time, returns will compound. Depending on which bank or institution where the ETF is purchased, it may or may not be possible to automatically reinvest dividends.

Remember, with all investments, a good return on investment is not guaranteed, even profits aren’t. Plus, investments that tend to earn a higher potential return may also come with higher 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.

Which Products Offer Compound Interest?

Some types of accounts earn compound interest. For example:

• High-yield savings accounts

• Money market accounts (MMAs)

• Certificates of Deposit (CDs)

With these types of accounts, the money you deposit typically earns a fixed amount of interest that typically compounds over time.

Test your understanding of what you just read.

The Takeaway

Compound returns can be a powerful way for your money to grow over time. When you invest your money in stocks or other asset classes, you have the potential to earn compound returns (although there is no guarantee, as investments include the risk of loss). And the longer you invest, the more time your returns may have to compound.

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

FAQ

Do stocks compound daily?

No, the value of stocks — the rise and fall of the price per share — changes frequently over time, but it does not compound. Stocks may deliver compound returns in that returns can accumulate, adding to your portfolio’s growth, but there are no guarantees.

What is the average compound interest return?

The average compound interest return depends on the types of savings vehicles you have. Be sure to check, as some accounts offer higher rates than others.

What is the difference between arithmetic and compounding returns?

With arithmetic returns, you take the difference between the ending value of an investment and the beginning value of the investment and divide it by the beginning value. Compound returns depend on the rate of return–meaning how much an investment gains or losses over time.

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.

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

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

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

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.

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.

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

SOIN-Q225-062

May

2025

Is It Worth Doing a Laundry Room Remodel?

By Lucy Maher | Growing Wealth, Home Ownership, mortgage | Comments Off

Laundry rooms are important, but they’re often not the prettiest of rooms. They also tend to be sandwiched into small spaces or hidden in inconvenient areas of the home. No wonder some homeowners consider remodeling them.

But whether you should undertake a laundry room remodel depends on the size of the space, the kinds of new appliances you want to install, and any special décor touches you’d like to add, among other factors.

A remodel might be worth it if it creates a perky and efficient space or a room that has multiple functions.

Key Points

• For a successful laundry room remodel, be sure to consider project scope, room usage, budget, and whether you want to do it yourself or get professional help.

• A remodel can enhance efficiency, add value to the home, and provide functionality for various nonlaundry household needs.

• You can maximize space with wall hooks, under-cabinet rods, and multifunctional furniture.

• DIY tasks include painting and putting up shelving, while professional help is needed for moving water lines and installing new sinks or drywall.

• Financing options for a remodel include cash, home equity loans, and home equity lines of credit.

Before Starting Your Laundry Room Remodel

If you’ve been thinking about giving your laundry room a clean start, you’ve probably got a lot of ideas and inspiration swimming in your head.

Before embarking on your project, think through what you’re hoping to accomplish by asking yourself the following questions.

What’s the Scope of the Project?

Some upgrades involve small improvements like new paint and cabinetry, while others call for tearing through walls, moving plumbing, or even relocating your laundry room to another area of the home.

Appliances should also be considered. Will you need a new washer and dryer, or do you plan on using the ones you currently have?

What Do You Plan to Use Your Laundry Room For?

While most laundry rooms are used solely for handling laundry, others also act as mudrooms and storage for cleaning supplies, sports gear, and bulk shopping items like bottled water, paper products, and pet food.

What your laundry room is used for will affect the laundry room remodel ideas available to you.

How Often and When Do You Do Laundry?

If you have a large family and do washing and drying frequently, that will influence the design of your new laundry room. You may need ample counter space for folding, a fold-down ironing board, or bins to hold each person’s clean clothing.

If you tend to do the laundry during the day, you might want to consider adding a window for some natural light. And if you’re more likely to wash clothes in the evening, under-cabinet lighting may help.

What Are Your Must-Haves?

Some homeowners might want bins and baskets to keep things tidy. Others may be looking to add features like a sink or build out their laundry room to accommodate more counter space.

Whatever your desire, it’s a good idea to list the elements that you can’t live without so you can build them into your budget.

💡 Quick Tip: Don’t overpay for your mortgage. Get a great rate by shopping around for a home loan.

How Much Can You Spend?

The scope of your project will dictate your budget and how you plan to pay for your remodel.

Some homeowners could see a laundry room remodel as a way to increase their home’s value and opt to borrow to pay for the project. Others might choose to keep things scaled down so they don’t spend beyond what they have on hand. A home improvement cost calculator can help you figure out how much your project might run you.

Laundry Room Remodel Ideas

Now that you’ve got the foundation of your project mapped out, it’s time to envision how your laundry room remodel will take shape. That will depend on the following factors.

If You Have Limited Space

Small laundry rooms can still pack a punch, thanks to creative ways to maximize your available space. You can do that by tucking laundry baskets under counters, adding a rod under cabinets to hang clothes, and using wall space for hooks to hang laundry bags or baskets that can hold clothespins, detergent, and dryer sheets.

Don’t forget that laundry rooms don’t need to be actual rooms; if you’re short on space, consider tucking your washer and dryer into an unused closet and installing a farmhouse door for easy access.

Depending on its size, you can then use the prior laundry room as a guest room, home office, nursery, or kids’ playroom.

If You’ll Be Using the Room for More Than Cleaning Clothes

The list of ways to use a laundry room is endless, and will largely depend on each household’s needs.

• Got a large dog? You might consider installing a pet-washing station, especially if you are already planning on undertaking plumbing work.

• Need a quiet place to conduct conference calls at home? A fold-down workstation meets both communication and laundry needs.

• Larger families may tuck an additional fridge in the laundry room.

• People who love to entertain may find storage for plates and glassware in the laundry room.

Your Budget

A laundry room remodel can quickly add up if new plumbing, cabinetry, and construction work are involved.

If you find yourself running beyond what you’re willing to spend, think of creative ways to get the laundry room you want without breaking the bank.

That might entail painting cabinets instead of replacing them, using open shelving instead of custom built-ins, and opting for durable paint in place of tiled backsplashes.

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DIY vs Calling In an Expert

Many homeowners are comfortable with do-it-yourself projects. In a laundry room remodel, these might include painting, replacing cabinetry, and installing shelving and hanging rods.

Other projects — moving water lines, installing new sinks or drywall, and demolition — require hiring a contractor. Mapping out which projects you will need to outsource will affect your budget and may also affect the scope of your project.

Paying for It

Smaller laundry room remodels, like those that require just a new coat of paint or a retrofitting of shelving to maximize storage space, can be done with fairly little outlay, especially if you do it yourself or have a friend or family member lend a hand.

Larger ones, or those that call for extensive demolition, architectural work, or the services of a general contractor, will be more expensive, of course.

The size of the project — and therefore how much money you’ll need—matters, as does your timeline for paying back any loan.
Here are some options:

• Cash may be a viable choice, especially for smaller projects.

• A home equity loan allows you to draw on the equity in your house to get a lump sum upfront, which can finance larger or multiple projects.

• A home equity loan of credit (HELOC) also leverages your house equity but gives you a revolving line of credit you can draw on if and when you need it.

The Takeaway

Laundry room ideas for remodeling range from DIY tweaks to major overhauls. A laundry room remodel may increase the value of your home or simply make life a little easier. Start by listing what you want to achieve and how you’re going to pay for it.

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FAQ

Where do I start renovating my laundry room?

Begin with the big picture of your project and its purpose. Consider what you need from your laundry room. Do you want it to maximize efficiency as you wash, dry, and fold? Do you want it to double as storage space for bulk items or out-of-season coats? Do you want it to provide space where you can work on craft projects? Once you work out your needs and priorities, you can focus on the features you’ll need to make the space work for you.

How long does it take to remodel a laundry room?

The length of time remodeling your laundry room requires depends upon how extensive your remodel is, whether you need professional help or can do it yourself, and whether permits are required for the work you want, among other factors. If you’re repainting or adding a few shelves, you may be able to do it in a weekend. If you’re hiring contractors for work that involves your plumbing or electrical systems or requires them to move walls, it could take as much as four to six weeks.

How much does it cost to move a laundry room?

The price tag for moving your laundry room can vary a lot, depending on where you live and how well set up the new location is for plumbing and electricity — and, of course, what you want to have in your laundry room. The cost can run from $500 to $5,000 or more.

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All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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

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.

SOHL-Q225-060

Apr

2025

Adult Children Living at Home: How to Set Rules and Expectations

By Anna Davies | Growing Wealth, Investing, money | Comments Off

Today, it’s not uncommon for adult children to return home or never leave the nest to start with. About one in three 18- to 34-year-olds live with their parents, according to the most recent U.S. Census Bureau data.

Moving back home can be a wise move for grown kids who may be dealing with job uncertainty, earning a low income, and/or be facing a mountain of student loan debt.

And it can wind up being a good deal for parents as well.

Some of the benefits include: opportunities for companionship, the possibility of sharing household expenses, and the ability for adult children to pay down student debt and save money for longer-term financial goals (for instance, buying a house).

But living in the same household again can also bring opportunities for tension and misunderstandings.

That’s why parents who welcome their kids back may want to set a few guidelines. Here are some rules both parents and grown children might want to wrangle before moving back in under one roof.

Key Points

• Set a timeframe for the living arrangement.

• Discuss financial contributions and household expenses.

• Establish clear house rules and behavior expectations.

• Maintain open communication about goals and concerns.

• Encourage financial independence through saving and budgeting.

What Is the Timeframe?

When adult children move back home, it’s helpful for both parties to have a timeframe in place, rather than the ’’foreseeable future.”

This may mean talking about why the move is happening. Is it to save money? If so, what is the money being saved for, and at what point should the child move out?

Some parents might find it helpful to set up a trial period, after which they can have a frank conversation about what is and is not working in the arrangement.

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Going Over the Financials

Many misunderstandings from adult children living at home stem from confusion over how much money, if any, they are expected to contribute.

It can be helpful for both parties to consider their expectations before coming together and talking through them. Some issues you may want to think about and then discuss:

• Will adult children be expected to pay rent? And if so, how much will rent cost? When will it be due? Some parents might want to set a flat rate, while others might consider a percentage of the child’s income, if that income is currently low but expected to rise.

• Will the child be responsible for a portion of bills, groceries, or other household costs?

• How will resources be allocated? Is the fridge open for anyone? Can the child use the family car if they need it?

• How much will bills go up with additional usage? Parents might decide they want their child to pay for any overages, or they might be okay with handling the increase themselves.

Recommended: How to Manage Money Better

Going Over House Rules and Behavior Expectations

Some parents have a “my house, my rules” expectation. But it can sometimes be mutually beneficial if both parties talk about behavior expectations with an attitude of give and take.

Often “unspoken expectations” don’t come up until a problem occurs. Talking through them proactively can make sure that everyone is on the same page.

Some issues parents and adult kids may want to go over:

• What are expectations for guests? Is it okay for romantic partners to sleep over? Do parents need a heads up before guests come by?

• What are communication expectations? Should a child inform their parents if they won’t be home by a certain time?

• What chores are expected? It’s wise to go over whether or not you expect that your child to do some of the supermarket shopping and/or clean any areas of the house beyond their living spaces. It’s perfectly acceptable to have your adult child pitch in on dinner duty, take on cleaning, or otherwise contribute to the house as an adult. Perhaps they pay for their own monthly supermarket costs.

• What do daily schedules look like? Maybe one family member needs quiet for work meetings. Maybe another needs access to family exercise equipment or the shower in the morning? Talking through routines — from breakfast to bedtime — will set expectations and avoid misunderstandings.

• What does privacy mean when you’re under the same roof?

Both parties may be concerned about how the new arrangement will affect their lives, and talking through those concerns can help families find solutions that work for everyone.

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Helping Adult Children Achieve Financial Independence

There’s nothing like living together to get financial habits out in the open. This applies to adult children and their parents. But that’s not necessarily a bad thing. By keeping an open dialogue about money, you can help your adult children get on the right financial track (and perhaps move out sooner, rather than later).

Here are some ways you may be able to help adult children work towards financial security.

Talking Through Financial and Savings Goals

Instead of asking your adult child how much they have saved, or how much credit card debt they have, consider asking them to talk through their short-term financial goals and long-term ones too.

Putting Rent to Work

Some parents who are in a position to do so may want to charge their children rent and then use that money to gift their child a down payment on a home or car, help with tuition, or assist their child in reaching another financial goal.

Or, in lieu of rent, you might request that your child set up an automatic deposit into a savings account that could eventually become a security deposit on a rental or an emergency fund.

Teaching by Example

One way to encourage disclosure about your adult child’s financial picture is to talk through your own.

Talk broadly through your retirement plan, any long-term care plans, or how you hit your own financial goals (such as buying a house). This can help your child start good financial habits and build a positive money mindset.

After all, personal finance is not typically taught formally, and giving your adult child — no matter how old — some insight into the tools and strategies you use can give them ideas for how they can effectively manage their money.

Trying Not to Nitpick

While it can be helpful to talk through your own strategies, it may not be helpful if your child feels like you’re critical of the way they are spending money.

Let’s say your adult child buys a latte every day. Sure, you can point out how much they would potentially save if they put that money into a high-yield savings account instead. But for the sake of the relationship, it may be easier to let certain habits go and focus on what your child is doing to work toward financial goals, such as investing in their company’s 401(k) plan or doing their taxes well in advance of tax day.

The Takeaway

Living under one roof may not always be easy for adult children or parents, but it comes with an opportunity for growth for everyone, as well as a closer relationship as equals.

Part of forging that relationship may involve setting some parameters early on about what is expected from grown children while they are living at home, from how much they may be expected to contribute financially to how often they can use the car.

Letting kids move back home (where they can live more affordably), and having open discussions about money, can help them not only save, but also develop good financial habits.

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Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What are reasonable expectations for an adult child living at home?

Reasonable expectations for an adult child living at home include contributing to household chores, paying a fair share of expenses, and maintaining a respectful and considerate attitude. They should also generally have a clear plan for their future, whether it’s pursuing education, employment, or other goals. Regular communication and setting clear boundaries can help ensure a harmonious living arrangement.

What if my adult child refuses to move out?

If your adult child refuses to move out, it’s a good idea to have an open and honest conversation about their reasons and your concerns. Ideally, you’ll want to set clear expectations and a timeline for moving out, and offer support in finding a place and securing employment. Consider creating a written agreement outlining responsibilities and consequences. If necessary, seek the help of a mediator or counselor to facilitate the discussion.

How to deal with disrespectful adult children living at home?

Dealing with disrespectful adult children generally involves setting firm boundaries and clear consequences. Consider having a calm and direct conversation about the specific behaviors that are unacceptable and the impact they have. Establish rules and consequences, and be consistent in enforcing them. At the same time, you’ll want to offer support and resources to help them become more independent. If the behavior continues, consider seeking family counseling or setting a deadline for them to move out.

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Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.

SOBNK-Q225-044

Tips on Evaluating Stock Performance

Evaluating Stock Performance

Total Returns

Using Indexes

Looking at Competitors

Reviewing Company Revenue

Using Stock Ratios in Evaluations

Price to Earnings (P/E) Ratio

Price to Earnings Growth (PEG) Ratio

Price to Sales (P/S)

Price to Book (P/B)

Dividend Yield

Dividend Payout

Return on Assets (ROA)

Return on Equity (ROE)

Profit Margin

Current Ratio

Earnings Per Share (EPS)

Debt-to-Equity Ratio

Additional Factors

The Takeaway

What Is the Wash-Sale Rule?

Which Investments are Subject to the Wash-Sale Rule?

What Happens When You Trigger a Wash Sale?

Avoiding a Wash Sale

What to Do After Selling an Asset at a Loss

Investing in ETFs or Mutual Funds Instead

Wash-Sale Penalties and Benefits

The Takeaway

How Can Investors Receive Compounding Returns?

What Are Compound Returns?

How Does Compound Interest Work?

The Value of Compound Returns

How to Get Compound Returns

Which Products Offer Compound Interest?

The Takeaway

FAQ

Do stocks compound daily?

What is the average compound interest return?

What is the difference between arithmetic and compounding returns?

Is It Worth Doing a Laundry Room Remodel?

Before Starting Your Laundry Room Remodel

What’s the Scope of the Project?

What Do You Plan to Use Your Laundry Room For?

How Often and When Do You Do Laundry?

What Are Your Must-Haves?

How Much Can You Spend?

Laundry Room Remodel Ideas

If You Have Limited Space

If You’ll Be Using the Room for More Than Cleaning Clothes

Your Budget

DIY vs Calling In an Expert

Paying for It

The Takeaway

FAQ

Where do I start renovating my laundry room?

How long does it take to remodel a laundry room?

How much does it cost to move a laundry room?

Adult Children Living at Home: How to Set Rules and Expectations

What Is the Timeframe?

Going Over the Financials

Going Over House Rules and Behavior Expectations

Helping Adult Children Achieve Financial Independence

Increase your savings with a limited-time APY boost.*

Talking Through Financial and Savings Goals

Putting Rent to Work

Teaching by Example

Trying Not to Nitpick

The Takeaway

FAQ

What are reasonable expectations for an adult child living at home?

What if my adult child refuses to move out?

How to deal with disrespectful adult children living at home?

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