Life Stages Archives

Sep

2025

What is Buying Power? Definition & Formula

What Is Buying Power in Investing?

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is Stock Buying Power?
Buying Power vs Purchasing Power
Buying Power vs Consumer Buying Power
How Does Buying Power Work?
Buying Power Example
How To Calculate Buying Power
How To Use Buying Power
FAQ

Buying power refers to an investor’s total capacity to purchase securities. Buying power can be more than an investor’s available cash; it may also include the use of margin — i.e., leverage — that would increase their ability to buy assets.

Thus, buying power includes an investor’s available cash plus their available margin, as determined by their brokerage.

Generally speaking, a standard margin account allows the investor to borrow twice the amount of cash they have on hand. For example, if an investor has $10,000 in cash, their buying power is $20,000. But margin rules vary, depending on the type of security.

Note that not all investors qualify for a margin account, and therefore some investors’ buying power is limited to the cash they have available to purchase securities.

Key Points

• Buying power in investing refers to an investor’s total cash plus any margin, or leverage, available to purchase securities.

• An investor must meet certain criteria in order to open a margin account.

• The use of margin, i.e., borrowed funds, enhances an investor’s buying power and it also increases their exposure to risk.

• Different margin accounts may have different levels of buying power.

• Buying power is sometimes referred to as excess equity.

What Is Stock Buying Power?

Buying power, or excess equity, is a measure of how much capital an investor has available to trade stocks, options, and other securities.

There are different ways to measure buying power, depending on the type of account an investor has. Completing trades can reduce an investor’s ready capital, while selling securities and depositing the cash into their trading account can increase it.

There’s no standard buying power definition; it’s simply a way to gauge an investor’s ability to purchase securities, based on the total resources they have in their trading account, including cash and margin.

Buying Power vs Purchasing Power

Buying power is not the same thing as purchasing power, however. Purchasing power refers to the amount of goods or services a given unit of currency can purchase, when factoring in inflation.

Purchasing power comes up during discussions about how inflation may affect various industries. Purchasing power is an important factor in retirement planning, owing to the impact of inflation over time.

Buying Power vs Consumer Buying Power

Further, a consumer’s buying power, or purchasing power, is a measure of how much a consumer has on hand to buy goods or services. Thus, consumer purchasing power, as such, isn’t related to an investor’s buying power relating to financial securities.

How Does Buying Power Work?

To understand how buying power works, it helps to understand when this term comes into play. The types of accounts that use or reference buying power include:

• Cash brokerage accounts

• Margin accounts

• Pattern day trading accounts

What Are Cash Accounts?

Generally speaking, a standard brokerage account is a cash account. The investor can buy and sell securities with the funds they have in the account.

Retirement accounts, such as an IRA or 401(k) may have cash or cash equivalents as part of the portfolio, but these accounts are not considered cash accounts owing to how they are structured with regard to taxes and annual contribution limits.

Cash accounts and retirement accounts don’t use margin or leverage.

What Are Margin Accounts?

Margin trading involves using leverage, or borrowing cash, from a broker-dealer to purchase some securities (not all securities can be bought using margin). Investors must be approved by their broker to use margin.

In addition, margin accounts are closely regulated, and investors must understand the rules and restrictions pertaining to initial margin, maintenance margin, margin calls, and so on.

While trading on margin can double an investor’s buying power (or more, depending on the amount of allowable margin), it likewise increases the risk of loss if a trade moves in the wrong direction. In that case, an investor could lose money, plus they’d have to repay the margin loan with interest.

Pattern Day Trading Accounts

Pattern day trading can also increase buying power for margin investors who prefer active trading versus a buy-and-hold approach.

The Financial Industry Regulatory Authority (FINRA) defines a pattern day trader as any investor who executes four or more day trades within five business days, provided that the number of day trades represents more than 6% of the investor’s total trades in the margin account for that same five-day period.

Pattern day trading accounts have higher account minimums than standard margin accounts ($25,000 vs. $2,000). The initial margin is higher as well: Pattern day traders only need 25% cash equity to cover a trade versus 50% for standard accounts.

Recommended: Stock Market Basics

Buying Power Example

Assume that an investor has $10,000 in cash in a margin account. They want to use that $10,000 to buy stocks online. The brokerage has a 50% initial margin requirement, meaning the investor can take a position that’s twice what they have in cash. In that case, the investor’s buying power calculation looks like this:

$10,000 in cash multiplied by 50% initial margin requirement = $20,000 in total buying power.

How To Calculate Buying Power

The method of calculating buying power depends on the kind of account involved. With a standard brokerage account, this calculation is simple. An investor would simply add up the amount of cash they have available to trade. So if someone has $20,000 in cash in their brokerage account they’d have $20,000 in buying power.

With margin accounts, buying power is typically double the amount of equity they have in their accounts. So an investor who has $25,000 in a margin account would have $50,000 of stock buying power in that instance.

With pattern day trading, the buying power is four times the amount of equity. So, if an investor has $50,000 in cash or equity with which to trade, they could have up to $200,000 in buying power using pattern day trading rules. It’s important to note that if an investor exceeds their day trading margin limits, their brokerage may issue a margin call.

Margin Calls

A margin call can happen if the value of securities in a margin account drops below a set level, as determined by the brokerage. When that occurs, the investor may need to deposit cash or other securities in their account or sell securities to make up a shortfall. The more leverage a brokerage allows, the more difficult it can be for an investor to fill the gap when there’s a margin call.

What Happens If You Don’t Have Enough Buying Power?

If you lack buying power as an investor, you simply won’t be able to place trades on your chosen platform. If you try to execute a trade and lack the buying power, the trade will simply not execute. The specifics may depend on your chosen exchange or platform, of course, but generally speaking, a lack of buying power means that you lack the ability to buy.

How To Use Buying Power

If you’re interested in trading stocks, options, or other securities, having more buying power can work in your favor. Trading on margin can allow you to invest larger amounts of money and it has the potential to magnify your investment returns — but there’s also a much greater risk of loss.

Say you have only $5,000 to invest. If you qualify, you can open a margin account, which would provide an additional $5,000 in leverage (borrowed funds) for a total of $10,000. You then use this $10,000 to purchase 500 shares of stock which are trading at $20 each.

The stock’s price doubles to $40 per share. Now your shares are worth $20,000. You decide to sell, paying back the $5,000 margin loan to your broker. You also pay $50 in interest for the loan. And you pocket $14,050.

Now consider a different example: Say you used $5,000 cash to buy 250 shares of that same stock at $20 per share. When the stock’s price doubled to $40, you would sell them and pocket $10,000. You’re still coming out ahead, but trading on margin would have given you more buying power and thus bigger profits.

How Margin Amplified Losses

When using buying power to your advantage, you do have to consider the risks as well. Just as margin trading can increase your profits, it can also increase losses if the securities you purchase decline in value. With margin, it’s possible to lose more than the value of the initial trade, accounting for interest on the loan and any other costs.

Worse, there is a risk of a margin call if the cash and equities in the account fall below a certain level. In the event of a margin call, you’d have to liquidate some of your holdings or deposit extra cash to cover the difference — or the brokerage would do so on your behalf, to restore the proper maintenance level in the account.

The Takeaway

As noted, an investor’s buying power refers to how much they have at their disposal to purchase various investments and securities. Understanding how buying power works matters, especially if you’re a day trader or you’re trading on margin. And even if you’re a beginning investor, it’s still important to know what this means when it comes to your first brokerage account.

If you feel like you still need some guidance in calibrating your investment strategy, or furthering your understanding of buying power, it may be beneficial to speak with a financial professional.

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.

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FAQ

What is buying power in simple terms?

Buying power, as it relates to investing, refers to how much an investor has to spend on investments, and can include cash in their account as well as using margin (leverage).

Why is buying power important?

Buying power gives an investor an idea of what they have to work with, and how they can leverage their assets and holdings to reach their financial goals. Understanding buying power may be particularly important for day traders or margin traders.

What is buying power vs cash?

Cash could refer to the investments you can afford to make with your wholly-owned assets, whereas buying power can also incorporate what you can borrow (margin) to purchase investments.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Photo credit: iStock/solidcolours

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SOIN-Q325-100

Sep

2025

Should You Ever Invest Your Emergency Fund?

By Pam O’Brien | Growing Wealth, invest, Investing | No Comments

Table of Contents

Should You Invest Your Emergency Fund?
The Risks of Investing an Emergency Fund
Considerations for Storing an Emergency Fund
3 Options for Keeping an Emergency Fund
FAQ

Life is unpredictable, and an emergency fund acts as your financial safety net. Whether it’s covering unexpected medical expenses or getting through a sudden job loss, an emergency fund gives you peace of mind and prevents you from relying on high-interest credit cards or loans during a crisis.

Experts generally recommend saving at least three to six months’ worth of living expenses for emergencies, which can add up to a sizable sum. With this much money sitting in an account, it’s natural to wonder: Should you invest your emergency fund to help it grow faster?

The answer is generally, no. Emergency funds should be readily available and liquid — meaning you can access them quickly without losing value. Riskier investments like stocks, mutual funds, or real estate, typically do not fit that profile. However, there are safe places where you can store your emergency fund while still earning a modest return.

Key Points

• Emergency funds should not be invested in volatile assets to avoid potential losses.

• Market fluctuations and withdrawal restrictions can pose significant risks to emergency funds.

• Liquidity ensures quick access to funds during emergencies.

• High-yield savings, money market accounts, and certain CDs are often recommended for emergency funds.

Should You Invest Your Emergency Fund?

It can be tempting to put your emergency fund to work. After all, if you’ve saved $10,000 or more, why not grow it in the stock market or tuck it into your retirement account? On the surface, it feels like a smart financial move.

However, your emergency fund serves a very different purpose from your investment accounts. Investments are meant to build wealth over time, while an emergency fund exists to protect you in the short term. That means safety and accessibility may matter more than potential growth.

Think of it this way: If you put $10,000 into a savings account, you’ll have that $10,000 several months from now. If you put that $10,000 in a brokerage account and invest in stocks, it might grow to $12,000 in a few months, but it could just as easily drop to $8,000 (or possibly even less) right when you need it most.

On top of that, certain investment accounts come with restrictions, taxes, and/or penalties that make it harder — and more expensive — to access your money quickly.

This doesn’t mean your emergency fund has to sit in a checking account earning little to no interest. The key is to find a balance: a place where your money remains safe, liquid, and accessible, while earning at least some return.

Recommended: Emergency Fund Calculator

The Risks of Investing an Emergency Fund

While investing can build wealth in other areas of your financial plan, it can undermine the purpose of your emergency fund. Here are the biggest risks you face when putting those savings into investments.

It Might Take You Longer to Get Your Money

Emergencies, by definition, require quick action. If your car breaks down or a pipe in your home bursts, you’ll likely need funds immediately. Some investments, however, are not designed for instant access. Stocks and mutual funds, for example, must be sold before you can access cash, and it can take a couple of business days for the transaction to settle. The longer it takes to access your money, the less effective your emergency fund becomes.

You Could Risk Losing Money

The stock market can be volatile. If you need to access your emergency fund during a market downturn, you could be forced to sell your investments at a loss. Even relatively stable assets like bonds or certain mutual funds can lose value when interest rates rise or market conditions shift. This makes them unreliable for something as crucial as an emergency fund.

You could also face taxes and penalties. Withdrawals from taxable accounts may trigger capital gains taxes, and pulling money early from retirement accounts often comes with penalties. What’s supposed to be a cushion could quickly turn into a financial headache.

Considerations for Storing an Emergency Fund

Instead of chasing returns, you’re usually better off putting your emergency fund in an account that is safe, yet not stagnant. The best places to keep an emergency fund allow you to:

Access Your Funds Easily

The most important feature of an emergency fund is liquidity. You need to be able to access the money quickly, ideally within minutes or hours, not two to three business days, or more. This means avoiding accounts where you might face delay, fees, or penalties for withdrawals.

Earn Potentials Returns on Your Money

While safety comes first, that doesn’t mean your emergency fund has to sit idle. Traditional savings accounts often earn a relatively low interest rate, but newer options such as high-yield savings accounts and money market accounts generally offer much better returns without sacrificing accessibility.

Even if the interest rate seems small compared to investment returns, earning 3.00% to 4.50% APY (Annual Percentage Yield) on your emergency fund can help combat inflation and ensure your money grows slowly over time instead of losing purchasing power.

3 Options for Keeping an Emergency Fund

If you want your emergency fund to be both safe and productive, here are three common options worth considering.

High-Yield Savings Account

A high-yield savings account (HYSA) can be a good choice for an emergency fund. Many HYSAs are offered by online banks, which generally have lower overhead costs and can pass those savings on to customers through higher interest rates and fewer (or no) fees.

HYSAs generally pay interest rates far above traditional savings accounts — often several times the national average. In addition, funds are typically FDIC-insured and accessible anytime.

Money Market Account

A money market account (MMA) blends features of savings and checking accounts. They typically offer higher interest rates than standard savings accounts while providing some of the conveniences of a checking account, such as checks or a debit card. Just keep in mind that some MMAs require high minimum balances and may charge monthly fees if balance requirements aren’t met.

Certificates of Deposit

Certificates of Deposit (CDs) offer a guaranteed return without risking your money, and rates are typically higher than traditional savings accounts. The tradeoff is that your funds are locked up for a specific term (which can range from a few months to several years), and early withdrawals typically trigger a penalty. However, there are two ways to make CDs work for your emergency fund:

• CD ladders: With this strategy, you spread your emergency fund across multiple CDs with staggered maturity dates (e.g., 3 months, 6 months, 12 months). This way, a portion of your funds becomes available regularly while still earning higher interest.

• No-penalty CDs: Some banks offer CDs that allow you to withdraw funds early without penalties. These can be a good compromise between higher interest and accessibility. Just keep in mind that no-penalty CD rates tend to be lower than traditional CDs with similar term lengths.

While CDs generally shouldn’t hold your entire emergency fund, they can work for a portion of it if you want to maximize returns without significant risk.

The Takeaway

An emergency fund isn’t meant to be an investment but, rather, a safety net. Putting your emergency savings in volatile investments like stocks or real estate can leave you vulnerable just when you need money the most.

That said, you don’t have to leave your emergency fund in a traditional savings account that may earn lower rates. High-yield savings accounts, money market accounts, and certain CDs can offer the perfect balance of safety, accessibility, and growth.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

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

Is it wise to invest your emergency fund?

Generally, it’s not wise to invest your emergency fund in risky assets like stocks, mutual funds, or real estate. The purpose of this fund is immediate accessibility and preservation of capital, not growth. Investments can fluctuate, and if you need cash during a downturn, you might be forced to sell at a loss. A safer option is keeping your fund in a high-yield savings account or money market account, where it earns more modest interest but remains secure and easily accessible.

How much of my emergency fund should be liquid?

Ideally, your entire emergency fund should be liquid, or at least the majority of it. Emergencies often require immediate cash access, so keeping funds in a savings account, checking account, or money market account is generally best.

If you have a larger emergency fund — say, more than six months’ living expenses — you might keep a small portion in short-term certificates of deposit (CDs). However, it’s generally a good idea to keep at least three to six months of essential expenses fully liquid and easily accessible without penalties.

What should an emergency fund not be used for?

An emergency fund should not be used for planned expenses, vacations, shopping, or investments. It exists specifically for unexpected, urgent financial needs such as medical bills, car repairs, or a sudden job loss. Using it for non-emergencies undermines its purpose and can leave you vulnerable when a real crisis comes up.

More from the emergency fund series:

Emergency Fund: What It Is and Why It’s Important

How Much Money Should Be in Your Emergency Fund?

How to Build an Emergency Fund

Emergency Fund Calculator

Where to Keep an Emergency Fund

When to Use Your Emergency Fund

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SOBNK-Q325-112

Sep

2025

IPO Book-Building Process Explained

By Mike Zaccardi, CMT, CFA | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is Book Building?
Book-Building Process
What Is Partial Book Building?
What Is Accelerated Book Building?
What Effect Does Book Building Have On IPO Prices?
FAQ

Initial public offering (IPO) book building is a process to help determine the share price for an IPO.

With book building, the investment bank that underwrites an IPO reaches out to institutional investors to gauge their interest in buying shares of a company looking to go public. The underwriter asks those interested to submit bids detailing the number of shares they seek to own and at what price they would be willing to pay.

Read on to discover how book building works and how it can affect the price of an IPO.

Key Points

• Book building is the preferred method by which a company prices IPO shares.

• There are five key steps in the IPO book building process: find a banker, collect bids, determine a price, disclose details, and allotment.

• Partial book building is restricted to institutional investors, while accelerated book building is used for large equity offerings to raise capital in a short period.

• The risk of an IPO being underpriced or overpriced when shares go public can lead to volatility, making IPO investing a high-risk endeavor.

• The goal of book building is to ensure proper market-based price discovery to help the issuing company set a fair share price.

What Is Book Building?

Book building is the preferred method by which a company prices IPO shares. It is considered the most efficient way to set prices and is recommended by all the major stock exchanges.

Among the first steps of the IPO process is for the private company to hire an investment bank to lead the underwriting effort. IPO book building happens when the IPO underwriter gathers interest from institutional investors, such as fund managers and other large investors, to “build the book” of that feedback and determine the value of the private company’s shares.

As part of the IPO process, the investment bank must promote the company and the offering to stir up interest before they can determine share price.

This is typically called an IPO roadshow. If the underwriter finds that there is sufficient interest based on responses from the investor community, then the bank will determine an offering price.

Book building is common practice in most developed countries. It has become more popular than the fixed-pricing method, which involves setting an IPO price before measuring investor interest. Book building, on the other hand, generates and records investor interest to land on an IPO price.

Book building can help find a fair share price for a private company based on market interest. When a bank gauges market interest, a floor price is sometimes used, and bids arrive at or above that floor price. The stock price is determined after the bid closing date. With the book building method, demand can be seen in real-time as the book is being built.

💡 Quick Tip: IPO stocks can get a lot of media hype. But savvy investors know that where there’s buzz there can also be higher-than-warranted valuations. IPO shares might spike or plunge (or both), so investing in IPOs may not be suitable for investors with short time horizons.

Book-Building Process

Firms going public want to sell their stock at the highest possible price without deterring the investment community. There are five key steps the issuing company must perform in the process of IPO book building in order to discover a market-based share price.

1. Find a Banker: The issuing company hires an investment bank to underwrite the transaction. The underwriter advises the company, guiding it through the lengthy book-building process. The investment bank, as a firm commitment underwriter (the most common underwriting arrangement in an IPO), also commits to buying all the shares from the issuer, carrying all the risk. The bank will then resell the shares to investors.

2. Collect Bids: The investment bank invites investors to submit bids on the number of shares they are interested in and at what price. This solicitation and the preliminary bids give the bankers and the company’s management an indication of the market’s interest for the shares. Roadshows are often used to grow investor appetite.

3. Determine a Price: The book is built by aggregating demand as the bids arrive. The bank uses a weighted average to determine a final cutoff price based on indications of interest. This step helps with pricing an IPO.

4. Disclosure: The underwriter must disclose details of the bids to the public.

5. Allotment: Accepted bidders are allotted shares.

Even if the IPO book-building process goes smoothly and a price is set, it does not ensure that actual transactions will take place at that price once the IPO is open to buyers. Book building simply helps to gauge demand and determine a fair market-based price. But substantial risks remain for interested investors, who could see steep losses if the share price drops after the IPO.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

What Is Partial Book Building?

Partial book building is another form of the IPO book-building process that happens only at the institutional level, rather than the retail level.

With partial book building, a select group of investors is approached regarding their interest in the IPO. Using their bids, a weighted average price is calculated and a cutoff price is determined. That cutoff price is then used as the public offering price to retail investors as a fixed price. The cost of the partial book-building IPO process is often lower due to its relative efficiency.

What Is Accelerated Book Building?

Accelerated book building is used for large equity offerings to raise capital in a short period of time. The investment bank is tasked with book building, determining a cutoff price, and allocating shares within 48 hours or less. No roadshow is involved.

The accelerated book-building process is typically used when a company needs immediate financing and raising capital from debt is off the table. It is typically done when a firm seeks to acquire another company.

Accelerated book building is often conducted overnight, with the issuing company asking investment banks to serve as underwriters before the next day’s placement.

What Effect Does Book Building Have On IPO Prices?

A good IPO book-building process helps ensure proper market-based price discovery. Still, there is the risk that an IPO can be underpriced or overpriced when shares finally go public. This can lead to volatility, which IPO investors also need to be aware of. This is one reason why IPOs are considered high-risk endeavors.

Underpricing happens when the offering price is below the share price on the first day of trading. In other words, the IPO is selling for less than its true market value. With an underpriced IPO, a company is said to have left money on the table because they could have set the offering price higher.

An overpriced IPO — meaning the offering price is above the stock’s true market value and higher than investors are willing to pay for it — can have negative implications for the future price of a stock due to poor investor response.

Investors may buy IPO stock on Day One of trading in the secondary market, while qualified investors can purchase IPO shares before they begin trading in the open market.

While there is no surefire way to guarantee a good IPO price, the book-building IPO method generally offers quality pre-market price discovery customized to the issuer. It also reduces the risk for the underwriter. It can have high costs, however, and there is the risk that the IPO will end up being underpriced or overpriced. The overall goal is to see a good and steady stock performance during and after the IPO.

The Takeaway

The book-building IPO process involves five critical steps to ensure a stock goes public promptly with as few hiccups as possible.

There are different types of IPO book building, and the way an investment bank performs the process can impact IPO prices. The goal is to set a fair market-based price for shares of the company looking to go public.

Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.

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

FAQ

What are the steps in book building?

There are five main steps in the book-building IPO process:

1. The issuing company hires an investment bank to underwrite the offering. The bank determines a share price value range and writes a prospectus to send to potential institutional investors.

2. The underwriting bank invites institutional investors to submit bids on how many shares they want to buy and at what price.

3. The book is built by sorting and summing up demand for the shares to calculate a final IPO price. It’s known as the cutoff price.

4. The investment bank is required to disclose the details of submitted bids to the public.

5. Shares are allocated to bidders who meet or exceed the final cutoff price.

What is 100% book building?

100% book building is when all of the company’s shares are sold through the book-building process. The final issue price of the shares is determined entirely by investor bids and demands.

Who carries out book building in an IPO?

The underwriters in an IPO, which are typically large investment banks, carry out the book building process. They build the book by asking institutional investors to submit bids for the number of shares of the company they’d be willing to buy and the price they would pay for the shares. They then list and evaluate investor demand based on the bids and use that information to set a price for the shares.

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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.

SOIN-Q325-080

Sep

2025

Smart Ways to Use Your Money After Graduation, Before Student Loan Payments Begin

By Melissa Brock | Fresh Out of School, Growing Wealth, Life Stages | Comments Off

Table of Contents

Why the First 6-9 Months After Graduation Matter Financially
8 Smart Financial Moves to Make Before Full Repayment Begins
What to Avoid During the Grace Period
What Is an Interest-Only Student Loan Repayment Plan?
How Interest-Only Repayment Can Help You Save Early On
Refinancing Student Loans
The Takeaway
FAQ

Graduating from college can be one of the most exciting events in your life, but navigating everything that comes after — finding an apartment, paying bills, and going to work every day — can be a challenge.

Plus, many graduates’ student loans start coming due. After you graduate, leave school, or drop below half-time enrollment, you typically have a six-month grace period before you must begin making payments on your federal student loans. The grace period for private student loans varies by individual lender.

There’s no one “best” way to handle finances after graduation, but some tips can help you think through both short- and long-term goals and make some solid financial plans. Let’s take a look at a few tips on managing your money after graduation.

Key Points

• The first six to nine months after graduation are crucial for establishing strong financial habits, such as budgeting, saving, and spending less than you earn.

• You’ll first want to create a budget and start building an emergency savings fund. Ideally, you’ll save three to six months’ worth of living expenses.

• As a new college graduate, it’s also important to pay down high-interest debt, start saving for retirement, learn how to invest, and save for big-ticket items, such as a down payment on a home.

• During the student loan grace period, you should avoid overspending or delaying all financial planning.

• Consider making interest-only student loan payments during the grace period or refinancing your student loans to potentially lower your rate. Be aware that when you refinance, you lose access to federal benefits.

Why the First 6-9 Months After Graduation Matter Financially

Think of the first six to nine months after graduation as the time you take to build a good financial footing, particularly if you have impending student loans. The habits you put into place now can help propel you in the right direction later, including setting you up for solid lifelong money habits.

For example, putting together a budget, saving money, and aiming to spend less than you make can serve you well for the rest of your life.

8 Smart Financial Moves to Make Before Full Repayment Begins

What types of financial moves should you make before your student loan payments start? Let’s take a look.

Build an Emergency Fund

An emergency fund is your backup in case something surprising happens, like a car breakdown, a sudden medical bill, or another (hopefully temporary) disaster. Without an emergency fund, you may be forced to rely on credit cards or payday loans to pick up the slack, which could put you into an undesirable debt cycle.

How much should you save? This amount depends on your specific lifestyle. What expenses have cropped up in the past? Knowing that number can help you set a savings goal. Many experts also suggest setting enough aside to be able to cover three to six months’ of living expenses. You can calculate your living expenses by adding up all your expenses (rent, insurance, utilities, phone, transportation, credit card payments, etc.) and deducting that amount from your take-home pay.

Even if you don’t think you can save much, try setting any small amount aside to help pad your emergency fund.

Start Budgeting with Confidence

Ideally, budgeting should give you freedom, not leave you feeling restricted. Think of a budget as a roadmap for where your money goes. Here are the steps to create a budget:

• Calculate your income. Add up your income based on your paystub or other earnings, such as money from a side hustle or second job. (Yes, even Doordash gigs count!)

• Know how much you spend. Know how much goes out of your account each month, through loans, insurance, housing, utilities, food, health care, transportation, etc. Don’t forget to include the fun stuff — entertainment, eating out, etc.

• Choose your budgeting method. You can choose from several budgeting methods. One method allows you to allocate your money into different categories (needs, wants, and savings and goals) which correspond to percentages: 50/30/20 or 70/20/10. (For example, 50% goes toward things you need, 30% goes toward things you want, and 20% goes toward savings and goals.) You can also opt for a zero-based budget, where every dollar gets assigned a job before the month begins. You subtract from your income until you get to $0 with a zero-based budget.

• Make adjustments: Do you need to change anything with your budget as you’re working through it? Consider adding a buffer in your budget to accommodate any financial challenges, such as a cracked car windshield or an emergency dental visit. Your budget will likely change from month to month, so don’t be afraid to tweak your spending (or up your income due to a lucrative side gig!).

Open a High-Yield Savings Account

Savings accounts can be a good place to park money you want to save for emergencies or for building up savings. High-yield savings accounts can offer new graduates a higher interest rate compared to regular savings accounts. Regular savings accounts average just 0.38% as of August 2025. High-yield savings account returns vary, but they can be as high as 5.00%.

Pay Down High-Interest Debt

High-interest debt usually exceeds the rates for mortgages and student loans, often carrying interest rates above 8.00%. Credit card debt is a common example of high-interest debt. The higher your interest rate, the longer it can take to pay off what you owe, especially if you only make the minimum payments. Paying down debt more quickly can help you make an impact on the amount you owe.

Making more than the minimum payments or trying the debt avalanche method can help you get rid of your debt faster. The debt avalanche method involves paying off the debt with the highest interest rate first, then moving on to the debt with the next-highest interest rate until you pay off all your debts.

Start a Roth IRA or Contribute to Retirement

A Roth IRA is an individual retirement account in which qualified distributions are tax-free. This means when you take money out in retirement, you won’t have to pay any tax on it.

The IRA contribution limit is $7,000 in 2025 for those under age 50. Assuming you invested the full amount ($583.33 per month) every year starting at age 22, you could retire at age 67 with $6,114,761 — even if you never invested more than $7,000 each year (assuming a 10% growth rate).

You can also contribute to an employer-sponsored retirement plan. One of the best reasons to invest in a workplace plan is the employer match, meaning your company will contribute funds to your retirement account as well. For example, your company might match dollar-for-dollar up to 3% of your salary or 50 cents per dollar on contributions up to 6%. The type of retirement plan you have determines the amount you can contribute. The longer you leave money in your plan, the more ownership you have of your account, and the more you’ll earn over time.

Whether you invest in your employer’s plan or a Roth IRA (or both!), you can use the power of compound interest to build a large nest egg for retirement.

Invest Small, Learn Fast

Even if you have limited funds after graduation, investing small amounts can still add up and grow significantly over time. Compound interest means you earn interest on the money you save, and in turn, that money earns interest. Over time, any amount of money you invest can grow.

Learn as much as you can about investing in the stock market to pick up the basics, formulate a plan, and stick to it. Doing so can help you build financial security and build your retirement.

Upskill with Online Courses or Certifications

Online courses and certifications are great ways to learn how to invest or learn more about the stock market. For example, the Wharton School at the University of Pennsylvania offers an online class and certificate program about value investing. The class teaches you how to invest in undervalued stocks and how to put specific investing strategies into place. At $4,800 for an 8-week class, it’s an investment in itself.

However, plenty of free courses can be found through platforms like Udemy, Coursera, Morningstar, Khan Academy, and MIT’s Open CourseWare. Just make sure you’re choosing a course from a reliable, trusted source.

Save Toward Big Life Milestones

What do you dream about accomplishing someday? Your list might include:

• Save for a car

• Go to graduate school

• Save for a down payment on a house

• Get married

• Start a business

• Have kids and save for their college

• Retire by a certain age

No matter your goal, it’s a good idea to write down the amount you think you might need for each and then put a savings plan into action to make it happen. Writing down your goals is one of the best ways to ensure you achieve them; you’re 42% more likely to achieve your goals if you write them down.

What to Avoid During the Grace Period

You have a short time before the student loan grace period ends. What should you avoid doing with your money? Let’s take a look.

Avoid Delaying All Financial Planning

Don’t skip financial planning during the grace period. In other words, you want to take advantage of the time you have to figure out exactly how much you can spend per month on housing, food, transportation, and other expenses. How do those numbers match up with your first job?

The more time you spend crunching the numbers, the more quickly you can determine how to comfortably live within your new take-home pay. The grace period offers an advantage in that it allows you a bit of a buffer as you’re experimenting. For example, if you go slightly over your grocery budget in the second month after graduation, you can adjust more easily since you still have some flexibility before student loan payments begin.

No matter what, start planning right away with the numbers at your disposal.

Avoid Overspending Due to Lower Payments

When figuring out how much you can spend per month, you may be tempted to overspend in other areas of your life. You may also be tempted to make just the minimum payments on debt, particularly credit card debt. Making just the minimum payments on a credit card can turn small purchases into years and years of payments.

For example, if you have a $5,000 credit card balance with a 23.00% APR and minimum payment of $100, it would take 14 years to pay off the card balance and you would owe over $11,739 in interest alone.

Even though you have the option to make the minimum payment (and potentially overspend in other areas), it isn’t in your best interest. Keep your expenses low and make more than the minimum payment.

What Is an Interest-Only Student Loan Repayment Plan?

Paying interest-only means you make only the interest payments on a student loan. Student loans are broken up into the following: the principal balance, the interest, and the fees. Here’s a quick definition of each:

• Principal: The amount you borrowed

• Interest: The continuous cost of borrowing the original principal amount

• Fees: The one-time, upfront charges for lender services like processing the loan

You must make a minimum payment when you repay your student loans, which goes toward both principal and interest. More goes toward interest rather than principal at the beginning, but eventually, you shift toward paying more toward principal.

You can pay down interest or make prepayments on student loans while you’re in school or during the grace period, especially on Federal Direct Unsubsidized Loans, which accrue interest while you’re in school. Making these payments can lower your overall balance and shorten the amount of time you pay back your loan.

How Interest-Only Repayment Can Help You Save Early On

Making payments before they’re due or paying more than the amount you owe each month can reduce the interest you pay over time and reduce your overall loan amount. Check with your loan servicer to learn more about how to make prepayments.

Recommended: How to Live with Student Loan Debt

Refinancing Student Loans

Refinancing student loans can be a smart financial move for many graduates. By refinancing, you can potentially lower your interest rate, which can reduce your monthly payments and the total amount of interest you pay over the life of the loan. Refinancing also allows you to consolidate multiple loans into a single payment, simplifying your debt management and making it easier to keep track of your financial obligations.

However, refinancing isn’t without its drawbacks. When you refinance federal student loans with a private lender, you lose access to federal benefits such as income-driven repayment, loan forgiveness programs, and deferment options. It’s important to weigh these potential losses against the savings you might gain from a lower interest rate.

Before making a decision, consider consulting with a financial advisor to ensure that refinancing aligns with your long-term financial goals and current financial situation.

💡 Quick Tip: Refinancing comes with a lot of specific terms. If you want a quick refresher, the Student Loan Refinancing Glossary can help you understand the essentials.

The Takeaway

Now that you know what to do after college and before student loan payments start, a quick reminder: There’s no right or wrong way to handle your money after graduation. However, one of the best things you can do is to get a bird’s eye view of your finances. What will you have coming in, and what will come out of your paycheck each month?

Whenever you can, look to the future. Think past what’s right in front of you and make smart moves toward the next big thing, whether it’s saving for a car or paying off your student loans. It’s exciting to think about all your future goals. You can achieve them, especially if you break them down into smaller savings goals.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What are the smartest ways to use your money after graduating college?

You can use your money in several ways after graduating college. However, you may want to prioritize saving for an emergency fund and using money to pay off any existing debt. For example, if you have $1,000 in credit card debt, you may want to consider getting the credit card debt paid off and then saving three to six months’ worth of expenses in an emergency fund. Try being as financially responsible as possible before your loan grace period ends.

Why is the student loan grace period important for financial planning?

You can use the student loan grace period to plan how you’ll handle your money before your student loan payments come due. For example, you can budget and live as if you actually do have a payment, even though you won’t owe anything for several months. Doing so can help you gauge how well you’re handling money, from budgeting for groceries to figuring out how much you can spend each month for entertainment. The earlier you can get a handle on how you’ll spend your money, the better off you’ll be in the long run.

Should I start making student loan payments during the grace period?

You can start making student loan payments during the grace period if you choose. Making student loan payments during this time can help shorten your loan term or reduce the amount you’ll owe overall. Even if it seems like a small amount, applying extra money toward your loans consistently over time can save you money.

Is it a good idea to open a Roth IRA right after graduation?

The earlier and more consistently you start saving for retirement, the more money you’ll have in your nest egg sooner. However, it’s more important to ensure you have the essentials covered, like food and shelter. Once you know you’ll have enough money for the necessities, then you can start investing in a Roth IRA.

What financial mistakes should recent college graduates avoid?

New college graduates should avoid paying bills late or not paying them at all, and racking up debt (credit cards, a new car). And the earlier grads can get to a few key financial to-dos, the better: budgeting, creating an emergency fund, and paying down existing debt. Get a handle on your money and put financial responsibility first on your priority list. Doing so can help set you up for financial success.

Photo Credit: iStock/nirat

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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 Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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SOSLR-Q325-016

Sep

2025

Investing in Growth Funds

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is Growth Investing?
Growth Fund Performance
Examples of Growth Stocks
Benefits of Investing in Growth Mutual Funds
Downside of Growth Mutual Funds
Evaluating a Company’s Potential for Growth
Buying Growth Mutual Funds
Investing for Growth or Value?
Determining When to Invest in Growth Mutual Funds
FAQ

A growth fund is a type of mutual fund or exchange-traded fund (ETF) that’s typically invested in growth stocks, i.e., companies that aim to deliver substantial positive cashflow and better-than-average returns. Growth funds are focused on capital appreciation over time.

Growth funds primarily include shares of growth stocks, but can also include bonds or other investments designed specifically with higher returns in mind. Individual growth funds typically focus on small- , mid- , or large-cap stocks (although some might offer a mix).

Unlike some value funds, growth funds rarely pay dividends. Instead, investors make money on the appreciation of the underlying stocks. Since growth mutual funds are considered somewhat riskier investments — with a higher risk of loss along with a potential for bigger gains — holding these funds for the longer term may help mitigate the short-term impact of price volatility.

Key Points

• In investing, a growth strategy is a more aggressive approach that’s focused on generating returns.

• Growth funds are primarily invested in growth stocks: shares of companies that aim to deliver returns.

• Growth funds may include stocks as well as bonds or other securities.

• A growth strategy can be risky, as it includes the potential for losses.

• Growth funds, like the growth stocks in their portfolios, generally don’t pay dividends, but reinvest earnings to fuel further growth.

What Is Growth Investing?

Growth investing is a strategy that focuses on increasing company revenue or investor returns. For this reason, growth investors may invest in younger or smaller companies, when they invest online or through a traditional brokerage, which are said to be in a growth phase, and whose earnings are expected to increase at an above-average rate compared to their industry sector or the overall market.

Growth Companies, Growth Strategies

Growth stocks aren’t always new companies, though. Larger, more established companies can also fall into this category, assuming they are poised for expansion. Big companies could be in a growth phase due any number of factors:

• Technological advances

• Shift in strategy

• Movement into new markets

• Acquisitions

How much growth can you expect to get from growth stock mutual funds? As with any mutual fund, the performance of these funds depends on their underlying assets and, in the case of actively managed funds, their portfolio managers’ strategies.

There are also growth index funds, which are passively managed. A growth index fund is a growth stock mutual fund that tracks the performance of a particular stock index that’s focused on growth (e.g., the CRSP Large Growth Index or CRSP Small Cap Growth Index).

Growth Fund Performance

To give you an example of how growth funds compare to the domestic equity market as a whole, the U.S. stock market had an average return of 11.6% in the last decade, compounded annually, as of Aug. 1, 2025, according to Yahoo Finance.

For context, here is the performance of five growth mutual funds and ETFs over the last 10 years, data from Morningstar, as of June 30, 2025.

Fund Name	Total Net Assets	10-year avg. annual return
Champlain Mid Cap Fund (CIPMX)	$3.8 billion	11.11%
Champlain Small Company Fund (CIPSX)	$1.7 billion	9.96%
Fidelity Series Large Cap Growth (FHOFX)	$2.1 billion	15.94%*
Loomis Sayles Growth Fund (LSGRX)	$17.7 billion	17.86%
Morgan Stanley Institutional Fund, Inc. Growth Portfolio (MGHRX)	$4.6 billion	5.74%*

Source: Morningstar, as of June 30, 2025
*5-year returns used; inception August 2018 for FHOFX, June 2018 for MGHRX.

Remember that growth investing can be volatile since companies typically take some risks in order to expand. Also, some growth companies can get a lot of media or investor attention, which can contribute to price swings as investors buy and sell shares with the hope of seeing a profit.

Examples of Growth Stocks

Market capitalization — which indicates the number of outstanding shares a company has multiplied by its price per share — is not a specific hallmark or characteristic of growth stocks. Growth stocks can be large-cap corporations, mid-cap, or smaller companies. That said, most growth funds generally tilt toward larger companies.

Large-cap companies can scale their manufacturing to produce more products at cheaper prices, which increases their potential. Plus, big companies tend to reinvest the money they make into research and development, acquisitions, or expansion.

Information technology companies are often the largest holdings in U.S. growth mutual funds, but these funds may also hold healthcare and consumer discretionary stocks as well.

Smaller companies also have a lot of growth potential, as noted above — and some small-cap companies may be in the initial startup phase, which can sometimes generate outsize growth. And many mid-cap companies have been around longer and may have the ability to adapt to new market needs.

Benefits of Investing in Growth Mutual Funds

There are a few good reasons to consider growth stock mutual funds, and portfolio diversification is a consideration here.

It would be expensive for most individual investors when trading stocks to achieve the level of diversification offered by a pooled investment like a growth mutual fund. Investing in a single fund gives investors exposure to a wide range of stocks in different sectors.

Growth funds may also have long-term potential. For instance, growth stocks are more likely to see returns during an economic boom cycle, when many companies are growing and thriving. But shares can also be volatile, which is one of the risks of the sector.

While investors may not be able to count on dividend income from a growth mutual fund, they may still be able to sell the fund for more than what they paid for it, although there are no guarantees.

Downside of Growth Mutual Funds

Like any other investment, there are potential drawbacks to keep in mind with growth stocks and their growth fund counterparts.

While growth stocks can potentially increase in value more quickly than other stocks, this also makes them a potentially risky and more volatile investment. A typical growth stock mutual fund might return 18.0% one year and –6.0% the next. That kind of volatility isn’t for everyone.

In order for a growth stock to keep growing, the company must continue to earn money. This is challenging for any company to maintain over a long period of time. If there’s a recession, if a company has an unforeseen loss, or can’t continue to grow, the value of the stock may go down.

To help manage this risk, investors may choose to hold growth stocks and growth mutual funds for the five to 10 years, so that they can ride out market fluctuations and potentially be more likely to make a profit.

It’s also important to keep in mind that some growth stocks could become overvalued by the market, which might impact a growth fund’s performance. In this scenario, an investor might buy shares in a growth fund, hoping for solid returns. But if one or more of the underlying companies in those funds ends up being overvalued, the stock’s performance might fall below investor expectations.

Evaluating a Company’s Potential for Growth

Assessing a company’s potential for growth, either in the near or long term, is not an exact science. But it’s important to consider how likely a company is to grow when determining whether it’s a good fit for a growth portfolio. This typically involves looking at several key metrics, including:

• Return on Equity (ROE). Return on equity is used to measure company performance. It’s calculated by dividing net income by shareholder equity over a set time period.

• Earnings Per Share (EPS). Earnings per share represents a company’s total profit divided by its total number of outstanding shares. EPS is used to measure a company’s profitability.

• Price to Earnings to Growth (PEG). The price to earnings to growth ratio represents the price to earnings (P/E) ratio of a stock divided by the growth rate of its earnings over a set time period. Growth funds tend to have a higher P/E ratio (price to earnings ratio), which is the cost of a company’s stock relative to its earnings-per-share (EPS) than other funds. This can make them more expensive, but their potential for growth might make the extra cost worth it.

When using these and other metrics to measure a company’s growth potential, it’s important to understand how to interpret them. For example, a company that has a higher earnings per share is generally viewed as being more profitable. Likewise, a high price to earnings ratio is considered to be an indicator of continued growth.

But investors should also consider how sustainable the outlook for profitability and growth truly is, given the context of a company’s revenue, debt, and cash flows.

Buying Growth Mutual Funds

When choosing which growth stocks or growth funds to invest in, there are several factors investors may choose to consider. These include:

• Historical performance

• Stocks and other securities held in the fund

• Fund fees (e.g., the expense ratio)

• Potential earnings

Growth funds can often — but not always — be identified by the word growth in their name. Some investors might choose to put their money in blended funds, which combine growth stocks with less risky holdings. These funds allow investors to benefit from some of the upsides of growth funds without quite as much risk.

Certain growth funds are exchange-traded funds, or ETFs. Like any ETF, these funds can be traded during the day like stocks.

It’s important for investors to understand the risks before investing in any stock or fund, and to build a diversified portfolio of assets in order to help mitigate risk. With a diversified portfolio, investors hold both riskier assets and less volatile assets, in an effort to reap potential benefits of growth without losing too much along the way.

It’s also vital to remember that past performance is not a guarantee of how well a stock or growth fund will perform in the future.

Recommended: Stock Market Basics

Investing for Growth or Value?

Growth investing and value investing are couched as different styles of investing, yet they share a similar profit-driven focus — just a different means of getting there. With growth investing, the overarching goal is to invest in companies that have solid potential for growth. With value investing, the goal instead is to find companies that have been undervalued by the market — and hopefully see them increase in value.

A value investor may seek out companies that they believe are bargains based on current market price. They then invest in these companies, either by purchasing individual shares or through value mutual funds, and hold onto those investments over time. The end goal is to eventually sell their shares for a profit down the line.

In addition to eventual capital appreciation, value stocks can also pay dividends to investors. Value stocks are typically more likely to be established companies rather than newer ones. The most important thing to know with value investing vs. growth investing is how to avoid a value trap. This is a company that appears to be undervalued, but actually has a correct valuation. In that case, an investor might buy in, expecting the stock’s price to rise over time, only to be disappointed by a price that stays the same or worse, declines.

Determining When to Invest in Growth Mutual Funds

Dollar cost averaging is a way to invest small amounts of money consistently over time, rather than attempting to time the market, which helps investors to limit their risk exposure. However, if there is a stock market correction, it can be a good time to pick up some extra assets while they’re at particularly low prices.

Growth stocks tend to do well during bull markets, so while they may not see significant gains during a recession, they can still be an option to consider for long-term investments to pick up before the next economic boom.

The Takeaway

Growth stocks have a primary goal of capital appreciation. These stocks are expected to grow more quickly than other stocks in the market, and because of this, growth mutual funds are considered riskier investments than other mutual funds with a high risk of loss along with a higher potential for gain.

Growth funds holdings tend to have a higher P/E ratio (price to earnings ratio), which can make them more expensive investments, but their rapid growth may make the extra cost worth it.

These types of funds are more likely to see returns during an economic boom, vs during a recession. During a recession or economic downturn, companies may not have the cash or earnings to be able to invest in growth, and the value of the stocks the fund could go down.

Investors who know the basics of growth mutual funds may be interested in adding some of these assets, or other types of mutual funds and ETFs, to their investment portfolio.

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

FAQ

Do growth funds pay dividends?

No, typically growth funds do not pay dividends because the underlying stocks held in the fund, which are growth stocks, reinvest profits into the company to fuel growth.

How risky is a growth fund?

Growth funds, like growth stocks, are generally considered higher risk owing to the volatility of some of the stocks they hold. Some investors may appreciate the potential for bigger gains, while others may not tolerate the risk exposure.

Which is better, investing for growth or income?

Choosing between an income strategy or a growth strategy will likely depend on your investment time horizon, as well as your goals. Investors in retirement may prefer investing with income in mind; younger investors with more years to ride out any volatility may want to invest in growth funds.

About the author

Rebecca Lake

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.

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.

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

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.

Fund Fees
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.

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.

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

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