25+ Potential Ways to Invest in a Carbon-free Future

27 Potential Ways to Invest in a Carbon-free Future

Impact investing and socially responsible investing has been growing in popularity in recent years, and will continue to grow for the foreseeable future.

Investing in a carbon-free future is one of the most powerful ways for individuals to help restore the climate. Studies have shown that investing in climate mitigation and adaptation now will prevent trillions of dollars in future losses from disaster relief, GDP decreases, and property losses, and it will cost far less to act now than to deal with future damages.

Another reason to start investing in a carbon-free future now: Since there will be a worldwide focus on the transition to a carbon-free economy in the coming years and decades, some investors might consider investing in green stocks to be one way to build a strong long-term portfolio. As with all investing, it’s essential to carefully consider the risks involved in your chosen investment strategies. Some, all, or none of the below strategies may be appropriate for you.

How Carbon Impacts Our Planet

Current carbon dioxide (CO2) levels in the atmosphere are higher than they have been in at least 800,000 years, and likely higher than they have been in the past 3 million years.

Human activities ranging from automobile use and building construction to agriculture results in greenhouse gas emissions. Over millions of years prior to the Industrial Revolution, carbon was removed from the atmosphere naturally through plant photosynthesis and other processes—but by fossil fuels like coal and oil, humans have put that carbon back into the atmosphere in just a few hundred years. Once emitted, that CO2 stays in the air for centuries.

Changing the concentration of greenhouse gases in the atmosphere changes the Earth’s carbon cycles and results in global climate change. Some effects of climate change are already visible: rising sea levels, more intense hurricanes and fires, disappearing glaciers, and more. Around half of the CO2 emitted since 1850 is still in the atmosphere, and the rest of it is in the oceans causing ocean acidification, which interferes with the ability of marine life to grow skeletons and shells.

Currently, CO2 emissions continue to increase yearly—so it’s just as important for us to scale up the removal of CO2 from the atmosphere as it is to continue working on reducing emissions.

There are ways companies can do construction, agriculture, and all other industrial activity without emitting greenhouse gases into the atmosphere, but scaling up these solutions will require a massive amount of investment. That’s where individual investors can make a difference—by putting money behind companies that are working to create a carbon-free planet.

Climate-Friendly Industries and Companies to Invest In

Ready to make a difference by supporting climate visionaries? Here are 25+ ways to invest in a carbon-free future.

1. Carbon Offsets

Individuals and companies can purchase carbon offsets to zero out their carbon emissions. How they work: You can calculate your estimated emissions from air or car travel or other activities, and invest in local or international projects that contribute to the reduction of emissions. For instance, an individual could invest in a solar energy project in Africa to offset their annual emissions.

Although carbon offsets are controversial because they don’t directly work to reduce one’s emissions, they do help to build out renewable energy infrastructure, regenerative agriculture, and other important initiatives. They are also helpful for offsetting certain activities that are often unavoidable and have no carbon neutral option, such as flying in a plane.

2. Carbon Credits

Carbon credits give a company the right to emit only a certain amount of carbon dioxide or other greenhouse gases.
They create a cap on the amount of emissions that can occur, and then the right to those emissions can be bought and sold in the market. Caps may be placed on nations, states, companies, or industries.

Carbon credits are controversial because larger companies can afford more credits which they can either use or sell for a profit, and some believe the program may lower the incentive for companies to reduce their emissions.

However, companies may be incentivized to reduce emissions in two different ways:

1. They can sell any extra credits they don’t use, thus making money.
2. Generally, limits are lowered over time, and companies that exceed their limits are fined—therefore, transitioning to lower emissions practices is in their best interest.

Although carbon credits are used by companies, individuals can invest in the market through ETFs, or consider carbon emissions alternative investments.

3. ESG Indices and Impact Investing ETFs

Individuals can invest in ESG (environmental social governance) and impact investing ETFs, which are funds made up of companies focused on socially and environmentally responsible practices. Companies included in these funds may be working on renewable energy, sustainable agriculture, plastics alternatives, or other important areas.

4. Climate and Low-Carbon ETFs

Within the impact investing and ESG investing space, there are ETFs specifically focused on climate change and carbon reduction. These exclude companies that rely on fossil fuels, focusing exclusively on companies deemed as climate-friendly.

5. Carbon Capture, Sequestration, and Storage

There are many ways that carbon can be removed from the atmosphere, including through trees and other plants, or by machinery. CO2 can also be captured at the source of emission before it is released into the atmosphere. Once captured, the carbon needs to be stored in the ground or in long-lasting products, so it doesn’t get leaked into the air. Interested investors might want to consider buying stocks in companies that sequester millions of tons of CO2 each year.

6. Products and Materials Made from Captured Carbon

Once removed from the atmosphere, carbon can be used to make many products and materials, including carbon fiber, graphene, and cement. The construction industry is one of the biggest emitters of carbon dioxide, so replacing standard materials with ones made from sequestered CO2 would have a huge impact. All of these materials industries are poised to see huge growth in the coming years, and investing in them helps promote market growth, which can lower the cost of materials and make them more accessible to customers.

7. Tree-Planting Companies and Sustainable Forestry

The business of planting trees is growing. Newer tree planting companies are currently private, but investors can buy stocks, REITs and ETFs in companies that practice sustainable forestry and land management, as well as companies that allow investors to purchase a tree.

8. Regenerative Agriculture

The way the majority of agriculture is currently practiced worldwide depletes the soil and land over time. This not only makes it harder to grow food, it also decreases the amount of CO2 that gets removed from the atmosphere and stored in the soil. But with regenerative agricultural practices, the quality of soil improves over time. Spreading the knowledge and use of regenerative farming is extremely important to both food security and greenhouse gas management. Individuals can invest in regenerative agriculture through REITs, or even by investing in individual farms.

9. Green Bonds and Climate Bonds

Green bonds function the same way as other types of bonds, but they are specifically used to raise money to finance projects that have environmental benefits. Projects could include biodiversity, rewilding, renewable energy, clean transportation, and many other areas in the realm of sustainable development. In addition to buying individual bonds, investors can buy into bond funds.

10. Blue Bonds

Blue bonds focus on protecting the oceans by addressing plastic pollution, marine conservation, and more.

11. Refrigerant Management and Alternatives

Refrigerants used for cooling are among the top five highest emitters in the world, according to nonprofit org Project Drawdown . There are several ways to invest in improvements in the refrigerant industry:

•  Invest in alternative refrigerants such as ammonia and captured carbon dioxide.
•  Invest in companies making new types of cooling devices.
•  Invest in refrigerant management companies that reclaim refrigerants.

Other companies are working to retrofit old buildings and provide new buildings with more efficient HVAC systems.

12. Plant-based Foods

Raising livestock for food has a huge environmental footprint: It leads to huge amounts of deforestation, and cows emit methane when they burp, which is a much stronger greenhouse gas than CO2. Raising cows also uses a lot of water, transportation, chemicals, and energy. Replacing meat and materials with plant-based options can significantly reduce emissions and resource use.

13. Food Waste Solutions

Food waste in landfills does not biodegrade naturally—instead it gets buried under more layers of refuse and biodegrades anaerobically, emitting greenhouse gases into the atmosphere for centuries. Landfills are one of the biggest contributors to global emissions, with food waste contributing 8% of greenhouse gas emissions worldwide.

Some companies are heavily investing in waste-to-energy and landfill gas-to-energy facilities, which turn landfill waste into a useful energy source—essentially making products out of food ingredients and byproducts that would otherwise have gone to waste. One has developed a promising food waste recycling unit that could help reduce the amount of waste that sits in landfills as well.

14. Biodiversity and Conservation

Protecting biodiversity is key to creating a carbon-free future. Biodiversity includes crucial forest and ocean ecosystems that sequester and store carbon while also maintaining a planetary balance of nutrient and food cycles.

Interest in biodiversity investments has been growing, and there is even an ETF focused on habitat preservation.

15. Sustainable Aquaculture

The demand for fish rises every year, in part because eating fish is better for the planet and emissions than eating livestock. But a lot of work goes into making sure fishing is done sustainably to avoid overfishing and species depletion, and prevent widespread disease and wasted seafood. Investors may choose to support sustainable aquaculture by seeking out new and established businesses in the industry, or by investing in ETFs that include companies involved in responsible use and protection of ocean resources.

16. Green Building Materials

Creating construction materials such as steel and concrete results in a significant amount of CO2 emissions. There is currently a race in the materials industry to develop new materials and improve the processes of making existing ones. Both new and established businesses are part of this race. Besides steel and concrete, other key building materials that can contribute to a carbon-free future include bamboo and hemp.

17. Water

Clean water systems are essential to the health of the planet and human life. As the population grows, there will be more demand for water, which requires increased infrastructure and management. Proper water management can have a huge impact on emissions as well.

There are three main ways for individuals to invest in the future of water. One is to invest in public water stocks such as water utilities, equipment, metering, and services companies. Another is to invest in water ETFs or in ESG funds that focus on water.

18. Green Shipping

The transportation of goods around the globe is a huge contributor to greenhouse gas emissions. In order to improve shipping practices, a massive shift is underway. The future of green shipping includes battery-operated vessels, carbon-neutral shipping, and wind-powered ships. Other technologies that play into green shipping including self-driving vehicle technology and AI. Investing in any of these areas can help the shift towards a carbon-free future.

19. Electric cars and bicycles

The use of electric cars and bicycles can significantly reduce the amount of CO2 emissions that go into the atmosphere. Interested investors might want to research stocks in the electric vehicle, charging, and battery space.

20. Telepresence

As has been proven during the COVID-19 pandemic, the reduction of work-related travel can significantly reduce global CO2 emissions. Video conferencing and telepresence tools continue to improve over time, which reduces the need for people to fly and drive to different locations for business meetings. Investing in companies working on these technologies may help solidify and continue the trend of remote work.

21. Bioplastics

Bioplastics include plastics that are completely biodegradable as well as plastics that are made partially or entirely out of biological matter. Currently bioplastics make up a very small portion of global plastic use, but increasing their use can greatly help to reduce waste and emissions.

22. Energy Storage

One of the biggest hurdles to scaling up renewable energy is creating the technology and infrastructure to store the energy, as well as reducing the costs of energy storage to make it more accessible. Investing in energy storage can help develop and improve the industry to help hasten the transition away from fossil fuels.

23. Green Building

Making the construction industry carbon-free goes beyond the creation and use of green building materials to include LED lighting, smart thermostats, smart glass, and more. These technologies can drastically reduce the energy used in buildings. There are many companies to invest in in the green building industry, as well as ETFs that include green building stocks.

24. Recycling and Waste Management

As the world’s population grows and becomes more urbanized, waste management and recycling will become even more important. Preventing waste from going to landfills is key to reducing emissions, as is the reuse of materials. For interested investors, there are many companies to invest in within waste management.

25. Sustainable Food

Food production is heavily resource-intensive, with many moving parts. In addition to companies working to improve soil health, refrigeration, plant-based foods, and food waste, there are also companies working on sustainable fertilizers, pesticides, irrigation, seeds, and other areas. One way to invest in sustainable food is through an ETF.

26. Sustainable Fashion

The fashion industry is one of the world’s worst polluters. In fact, the fashion industry produces about 10% of global carbon emissions, in addition to its huge water use and polluting the ocean with plastics. Several of the world’s most well-known sustainable fashion brands are privately held, but increasingly, public companies are also making big strides in sustainability. Individuals can also support sustainable fashion by investing in material companies and agricultural producers that make bioplastics, bamboo, hemp, and sustainable leather alternatives.

27. Renewable and Alternative Energy

Energy is another important area to invest in for a carbon-free future. Within the renewable and alternative energy space, individuals can invest in companies working on wind, solar, biomass, hydrogen, geothermal, nuclear, or hydropower. There are countless companies and ETFs to invest in within renewable energy.

The Takeaway

Every industry around the world needs to make big shifts in the coming years to reduce emissions and build a carbon-free future. As an individual, investors can make their voices and their choices heard with their dollars, by investing in companies leading the way in sustainability.

Looking to start building your investment portfolio? SoFi Invest® is a great place to start. Using the investing platform, you can research and track stocks and ETFs, view your financial information in one simple dashboard, and buy and sell stocks right from your phone.

Find out how to get started with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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.

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

Is the Stellar Lumen a Good Crypto Investment?

As a key component in Stellar’s global payment system, the Lumen (XLM) has attracted increasing attention since it came out in 2014. Lumen has seen major growth since its inception, and its recent gains have attracted fresh attention from investors.

Here’s what you need to know about this blockchain-based cryptocurrency, and whether to invest in it.

What are Stellar Lumens?

Lumen is a cryptocurrency that trades on the open-source, decentralized payment protocol Stellar network. The Stellar network was built to help users large and small send money and assets around the globe. As such, Stellar has positioned itself as a fast, global exchange network that can host thousands of trades between a wide array of traditional, government-issues currencies and a host of blockchain-based tokens and coins per second.

Currently, investors who want to exchange cryptocurrency tokens for established currencies can run into a lengthy and expensive process. Stellar pitches itself as a way to make those trades faster and cheaper, using Lumens to pay transaction fees and maintain investor accounts within the Stellar network.

There are roughly 22.1 billion Lumen coins in circulation, with a maximum supply of 50 billion. As of late January 2020, it had a market capitalization of more than $6 billion.

How Lumens Work

Like most cryptocurrencies, Lumens use a blockchain-based technology, and so the transactions on the Stellar network go into a shared, distributed, public ledger, which can be accessed by anyone around the globe. That public ledger is essential for anyone trying to buy or sell a token, and requires consensus on the ledger about the ownership and value of the tokens in order to function.

Consensus within that shared public ledger is where Stellar differs from many other forms of cryptocurrency, such as Bitcoin. Bitcoin uses what’s probably the most popular way to reach consensus on a blockchain, called proof-of-work (PoW). In PoW, a single market participant announces their conclusion about the information that’s been submitted in a blockchain, which all other participants can then verify. This process protects against false conclusions, while rewarding participants who verify the true information with newly mined bitcoins.

But the Stellar network takes a different approach, by distributing the consensus function to mini-networks. Each Stellar network participant chooses other participants whose consensus they agree with. And the consensus of each mini-network will function as valid for the overall Stellar network, as long as the conclusions of mini-networks overlap.

By relying on mini-networks rather than mining, Stellar’s consensus method is designed to offer faster and less-expensive transactions between Lumens and any other crypto or traditional currency. Stellar didn’t invent the process, but adapted an open-source version of it from Ripple.

How to Buy Stellar Lumens

For those still learning the basics of crypto investing, Lumens may not be as familiar as Bitcoin, Ethereum, and other cryptocurrencies. But investors who want to buy Stellar Lumens have a wide range of options.

The coins themselves are available for purchase on every major cryptocurrency exchange, including Coinbase, Kraken, Bittrex, Coincheck and more. Investors can also buy Lumens on Stellar’s own free peer-to-peer trading network StellarX. And investors without a crypto wallet can buy crypto through an exchange-traded-fund (ETF) that invests in cryptocurrencies, including Lumens.

Recommended: Understanding the Different Types of Cryptocurrencies

Stellar Lumens Price

As of this writing in early April 2021, the price of Stellar Lumens was $0.50. It experienced an all-time high of $0.87 in early 2018.

History of Stellar Crypto

Stellar and Lumens came into being in 2014, when Ripple co-founder Jed McCaleb launched the new network in collaboration with Stripe CEO Patrick Collison. Ripple is also a blockchain-based network, with its own currency, called XRP, which had a market cap of just over $12 billion as of late January.

Stellar quickly gained traction. By August of 2014, the first Brazilian bitcoin exchange, Mercado Bitcoin, selected the Stellar network for its transactions. And by the beginning of 2015, roughly 3 million user accounts operated on the Stellar network, and the market cap of the Lumen was almost $15 million at the time.

A year later, Stellar entered into a partnership with global consultancy Deloitte to develop a new payments app. And in 2017, Stellar made headlines when it partnered with IBM to establish “currency corridors” in the South Pacific. Its goal was to process up to 60 percent of the cross-border payments between countries including Australia, Fiji, and Tonga.

The connections between Stellar’s Lumen and Ripple’s XRP may prove more important than just having the same co-founder. In many ways, the two are competitors. They use similar technology and offer similar advantages, when it comes to allowing quick and inexpensive transfers of funds. The difference at the moment is that Ripple’s XRP are targeted at large financial institutions, while Stellar is also intended for individual users—especially populations around the globe without easy access to banks.

Is Stellar Crypto a Good Investment?

For investors in Lumen, the developing legal situation with XRP may be worth watching. In late 2020, the Securities and Exchange Commission sued Ripple for not registering XRP coins as securities. The regulator claims that because Ripple owns the majority of the existing 100 billion XRP coins, and sells some each quarter, they fall under securities laws.

Whether Stellar and the Lumen will benefit from that development, or face similar challenges, remains to be seen.

When investing in crypto, most seasoned investors stress caution. While there are regular headlines about one form of crypto or another reaching record heights, many other forms have fallen to zero, and many estimates list more than 1,000 cryptocurrencies that have become “dead coins.”

Some failed cryptos were scams, but others simply failed to catch on. At the same time, the entire cryptocurrency asset class faces other risks, such as hacks and the possibility of large-scale crackdown by crypto regulators. And as with any investment, investors should be mindful of the impact of paying crypto taxes on their returns.

Lumen is one of the more larger cryptocurrencies. As of late January 2020, it was the 11th-largest crypto with a market capitalization of more than $6 billion, according to coinmarketcap.com. By comparison, bitcoin had a market cap of just over $602 billion. And Ripple’s XRP was the fifth largest, with a market cap of more than $12 billion.

Being relatively established helps Lumen by making it more heavily traded and liquid than lesser-known cryptocurrencies. But like many other cryptos, it is subject to big price swings. After months in the 6-to-8-cent range, it jumped to 44 cents in early January 2021, only to drop to 27 cents in the following days, making for a wild ride.

The Takeaway

Stellar Lumen is a blockchain-based cryptocurrency that has much in common with Ripple. While its intended use is as a secure and accessible way to process cross-border payments between individuals all over the world who may not have access to traditional banking options, it has become the 11th-largest crypto, and investors have taken note.

While Bitcoin launched a new asset class little more than a decade ago, today there are many different cryptocurrencies for investors to learn about and invest in. If your curiosity about cryptocurrency is fueled by a desire to start investing, SoFi Invest® can be a great place to start. SoFi members can manage crypto investments in the SoFi app, with the confidence of knowing their crypto is in a secure platform.

Find out how SoFi Invest can help you with your investment goals.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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chalkboard worldmap financial charts

A Guide To Investing in International Stocks

Investors can easily exhibit signs of “home country bias”–the tendency to favor stocks from one’s own country. But wagering on international markets can be an important way to diversify and gain exposure to companies benefiting from rapid growth. And while American companies tend to pay higher dividends, investors may find attractive valuations abroad.

Since the 2008-2009 financial crisis, U.S. stocks have trounced foreign equities. The forces behind this trend have been easy Federal Reserve monetary policy, impressive U.S. corporate earning growth, and jaw-dropping rallies by a handful of mega-cap technology stocks.

But financial markets have a tendency to revert to their long-term averages–a concept known as mean reversion. And starting in 2021, money flows into overseas stock funds picked up, a sign that investor preferences are already shifting. However, foreign stocks also pose significant risks: such as local instability, differing reporting requirements, and volatile growth.

Here’s a closer look at foreign stocks and a guide to how to invest in them:

Pros & Cons of Foreign Stocks

Advantages of Investing in Foreign Companies

The U.S. stock market is the biggest in the world, accounting for a little more than half of the $95 trillion global equity market. But just because the U.S. market is the biggest, that doesn’t mean it’s the fastest growing or holds the best value. Here are some of the benefits of investing in international companies:

•  Valuations: A staggering bull market in U.S. shares has left companies richly valued relative to foreign companies. For instance, the cyclically adjusted price-to-earnings ratio for the S&P 500 stood at 29.5 times in November 2020, while for the MSCI All-Country World Index, it was 18.3 times, according to Bloomberg data.
•  Economic Growth: The U.S. stock market is outsized relative to its economy. While U.S. shares account for 56% of the global market, as a national, it only makes up 15% of global gross domestic product. Buying overseas stocks can be a way to participate in the rapid growth that many regions could see as more of their population joins the middle class.
•  Geographic Diversification: Foreign-stock investing allows investors to hedge some U.S.-specific risks, by investing in the economies of other countries.
•  Sector Diversification: The U.S. stock market is overwhelmingly concentrated in tech or tech-linked companies, with the 10 biggest stocks in the S&P 500 making up close to 30% of the index.

Recommended: A Guide to Tech IPOs

Risks of Investing in Foreign Stocks

While there are many reasons to invest in international markets, these investments also come with risks that will surprise investors who are accustomed to domestic markets.

Volatile Growth: While overseas countries can post faster-paced growth than the U.S., that expansion can be jumpy. The International Monetary Fund said in April 2021 that while the U.S. was likely to experience a red-hot recovery after the Covid-19 economic downturn, emerging-market countries may lag behind and experience a more sluggish rebound.
Political or social instability: Depending on the country where they invest, an investor may have to grapple with the possibility of revolution, war or economic collapse.
Reporting Requirements: Not every market is rigorous in the transparency and reporting it requires from the companies on its public markets. That can make it hard to get the full story of what’s happening with an investment. Securities regulation as a whole varies from country to country.
Liquidity: International stocks trade in smaller markets, and certain markets may lack a large amount of buyers and sellers that could make the market efficient. That makes it more likely prices of assets will move with buy or sell orders.
Currency Risk: If a country’s currency sinks relative to the U.S. dollar, then a U.S. investor will lose a portion of the gains in any stocks that are traded in that currency. In the case of a foreign stock traded in the U.S., the currency of which that company does business will have a bearing on how U.S. investors view the company’s earnings.
Higher Fees: commissions and other trading costs related to international stocks are much higher than they are for domestic stocks. That translates into higher fees for a fund, or higher brokerage commissions if the investor buys and sells those stocks directly.

Recommended: What Are Liquid Assets?

How to Trade Foreign Stocks in the U.S.

International-Stock ETFs and Mutual Funds

Most investors who want more exposure to overseas markets will want to consider a mutual fund or an exchange-traded fund (ETF).

Investors based in the U.S. aren’t allowed to invest in mutual funds that are domiciled in other countries. That leaves U.S.-based funds that trade foreign securities. Those funds are usually categorized as either “global” or “international. ”

They sound interchangeable, but they have one big difference. Global funds own securities from all over the world, including the U.S. International funds, on the other hand, invest only in securities from countries outside the U.S.

Both global and international mutual funds include actively managed funds, where a portfolio manager and a team of analysts pick the securities in the fund. They offer professional investing in unfamiliar lands, but often come with high expense ratios.

And there are also funds and ETFs that invest in indexes. The wide array of indexes and the explosion of ETFs allows investors to use these tools to invest in very specific regions, countries and sectors within those countries and regions.

An ETF can also allow investors to buy quick exposure to the broader international markets. For example, an index fund or ETF that tracks the MSCI World Index would give an investor access to equities in 23 developed countries.

Recommended: The Pros and Cons of Thematic ETFs

What Are American Depository Receipts (ADRs)

Investing directly in overseas securities is where things get a little more complicated. One popular way to own international stocks is to buy American depository receipts (ADRs).

Many foreign companies use ADRs to raise capital in U.S. markets. Each ADR represents some number of underlying shares of the company’s stock, and trades throughout the day. Global Depository Receipts (GDRs) are another way to buy shares in overseas companies. But they are typically traded on the London Stock Exchange and Luxembourg Stock Exchange.

But there are also ways for investors to directly purchase foreign stocks. One is to open a global account with a domestic broker, and most large brokerages offer this option. If investors are targeting opportunities in a specific country, they can open an account with a local broker in that country.

Different Types of International Markets

International stocks as a broad category may be enough for an investor who sees them as a simple way to diversify their overall equity holdings. But different international investments have widely varying risk/reward profiles.

Investing in Developed Markets

The first category of countries to invest in are so-called “Developed Markets.” These are countries with industrial and post-industrial economies and mature capital markets, such as England, Australia, and Japan. As a general rule, these offer similar growth and risk to the U.S.

Investing in Emerging Markets

The next category is “Emerging Markets,” which are still growing and modernizing to an industrial or information-driven economy. They include places like Thailand, Russia and South Korea. Investments in these markets may come with much bigger opportunities for growth. But they also carry the risk that comes with often-political climates, along with other risks unique to the countries they’re in.

Investing in Frontier Markets

The third category consists of “Frontier Markets,” which are also known as pre-emerging markets. Companies in these countries, such as Argentina, Bangladesh and Kenya, come with even larger opportunities, but even more risk, including political and currency instability, as well as very little regulation.

The Takeaway

International stocks offer diversification, unique opportunities, and can help investors hedge any U.S.-specific risk. But they also bring their own set of costs and risks.

The question of how much of an investor’s total assets should be allocated to international stocks depends on the investor’s expertise, risk tolerance and long-term goals. But some investors have said they allocate 30% of equities internationally, a level that allows for diversification while recognizing higher volatility.

Recommended: What Is Asset Allocation?

You could get started investing today by opening an account with SoFi Invest®. The Active Investing platform allows you to buy stocks, ETFs, and fractional shares without paying commission fees. For those who want a more hands-off approach, the Automated Investing service invests money for you based on your goals and risk tolerance, without charging a SoFi management fee.

Get started with SoFi Invest today.


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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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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7 Signs it’s Time for a Mortgage Refinance

Maybe you’ve considered refinancing your mortgage, but you’ve only dipped your toe in the exploratory waters. Is now the right time? Will rates stay low? Could they go lower?

It can be hard to know when to take the plunge.

Whether you purchased a home recently or bought a home years ago, you probably noticed that average mortgage rates continued to hover near historic lows in early 2021.

But as with any financial rate or data point, it is hard—if not impossible—to time the market or predict the future.

Homeowners often look to refinance when it could benefit them in some way, like with a lower monthly payment. Refinancing is the process of paying off a mortgage loan with new financing, ideally at a lower rate or with some other, more favorable, set of terms.

Here are seven signs that locking in a lower mortgage rate now could be the right move.

1. You Can Break Even Fairly Quickly

Refinancing a mortgage costs money—generally 2% to 5% of the principal amount. So if you are refinancing to save money, you’ll likely want to run numbers to be sure the math checks out.

To calculate the break-even point on a mortgage refinance—when savings exceed costs—do this:

1. Determine your monthly savings by subtracting your projected new monthly mortgage payment from your current monthly payment.
2. Find your tax rate (e.g., 22%) and subtract it from 1 for your after-tax rate.
3. Multiply monthly savings by the after-tax rate. This is your after-tax savings.
4. Take the total fees and closing costs of the new mortgage loan and divide that number by your monthly after-tax savings. This yields the number of months it will take to recover the costs of refinancing—or the break-even point.

For example, if you’re refinancing a $300,000, 30-year mortgage that has a fixed 6% rate to a new 4% rate, refinancing will reduce your original monthly payment from $1,799 to $1,432—a monthly savings of $367. Assuming a tax rate of 22%, the after-tax rate would be 0.78, which results in an after-tax savings of $286.26. If you have $12,000 in refinancing costs, it will take nearly 42 months to recoup the costs of refinancing ($12,000 / $286.26 = 41.9).

The length of time you intend to own the home can affect whether refinancing is worth the expense. You’ll want to run the calculations to make sure that you can break even on a timeline that works for you.

The rate and fees usually work in tandem. The lower the rate, the higher the cost. (“Buying down the rate” means paying an extra fee in the form of discount points. One point costs 1% of the mortgage amount.)

If you’re shopping, each mortgage lender you apply with is required to give you a loan estimate within three days of your application so you can compare terms and annual percentage rates. The APR, which includes the interest rate, points, and lender fees, reflects the true cost of borrowing.

2. You Can Reduce the Rate by at Least 0.5%

You may have heard conflicting ideas about when you should consider refinancing. The reason is that there is no one-size-fits-all answer; individual loan scenarios and goals differ.

One commonly espoused rule of thumb is that the home refinance rate should be a minimum of two percentage points lower than an existing mortgage’s rate. What may work for each individual depends on things like loan amount, interest rate, fees, and more.

However, the combination of larger mortgages and lenders offering lower closing cost options has changed that. For a large mortgage, even a change of 0.5% could result in significant savings, especially if the homeowner can avoid or minimize lender fees.

Maybe rates are low enough that you choose to take a higher rate with a no closing cost refi.

3. You Can Afford to Refinance to a 15-Year Mortgage

When you refinance a loan, you are getting an entirely new loan with new terms. Depending on your eligibility, it is possible to adjust aspects of your loan beyond the interest rate, such as the loan’s term or the type of loan (fixed vs. adjustable).

If you’re looking to save major money over the duration of your mortgage loan, you may want to consider a shorter term, such as 15 years. Shortening the term of your mortgage from 30 years to 15 years will likely cost you more monthly, but it could save thousands in interest over the life of the loan.

For example, a 30-year $1 million loan at a 7.5% interest rate would carry a monthly payment of approximately $6,992 and a total cost of around $1,517,172 over the life of the loan.

Refinancing to a 15-year mortgage with a 5.5% rate would result in a higher monthly payment, about $8,171, but the shorter maturity would result in total loan interest of around $470,750—an interest savings over the life of the loan of about $1,046,422 vs. the 30-year term.

One more perk: Lenders often charge a lower interest rate for a 15-year mortgage than for a 30-year home loan.

4. You’re Interested in Securing a Fixed Rate

Borrowers may take out an adjustable-rate mortgage because they may get a lower rate (at least initially) than on a fixed-rate mortgage for the same property. But just as the name states, the rate will adjust with market fluctuations.

Typically, ARMs for second mortgages such as home equity lines of credit are “pegged” to the prime rate, which generally moves in lockstep with the federal funds rate. First mortgage ARM rates are tied more closely to mortgage-backed securities or the 10-year Treasury note.

Even though ARM loans come with yearly and lifetime interest rate caps, if you believe that interest rates will move higher in the future and you plan to keep your loan for a while, you may want to consider a more stable fixed rate.

Refinancing to a fixed mortgage can protect your loan against rate increases in the future and provide the security of knowing how much you’ll be paying on your mortgage each month—no matter what the markets do.

5. You’re Considering an ARM

You may also be considering a move in the other direction—switching from a fixed-rate mortgage to an adjustable-rate mortgage. This could potentially make sense for someone with a 30-year fixed loan but who plans to leave their home much sooner.

For example, you could get a 7/1 ARM with a potential lower interest rate for the first seven years, and then the rate may change once a year, when up for review, as the market changes. If you plan to move on before higher rate changes, you could potentially save money.

It’s best to know exactly when the rate and payment will adjust, and how high. And it’s important to understand the loan’s margin, index, yearly and lifetime rate caps, and payments.

6. You’re Considering a Strategic Cash-Out Refi

In addition to updating the rate and terms of a mortgage loan, it may be possible to do a cash-out refinance, when you take out a new loan at a higher loan amount by tapping into available equity.

The lender will provide you with cash and in exchange will increase your loan amount, which will likely result in a higher monthly payment.

If you go this route, realize that you’re taking on more debt and using the equity you have built up in your home. Market value changes may result in a loss of home value and equity. Also, a mortgage loan is secured by your home, which means that the lender can seize the property if you are unable to make mortgage payments.

A cash-out refi may make sense if you use it as a tool to pay less interest on your overall debt load. Using the cash from the refinance to pay off debts carrying higher rates, like credit cards, could be a good move.

Depending on loan terms and other factors, a lower rate may allow for overall faster repayment of your other debts.

7. Your Financial Situation Has Improved

When putting together an offer for a mortgage, a lender will often take multiple aspects into consideration. One of those is prevailing interest rates. Another is your financial situation, like your credit history, credit score, income, and debt-to-income ratio.

The better your personal financial situation in the eyes of the lender, the more creditworthy you are—and the better the terms your loan offer could be.

Therefore, it may be possible to refinance your mortgage loan into better terms if your financial situation has improved since you took out the original loan, especially when paired with relatively low market rates.

The Takeaway

Is it time to refinance? Is the prospect of a lower interest rate or different loan term exciting? Locking in a lower rate now could help you achieve your long-term goals by freeing up cash for other stuff, like retirement or a big vacation.

Sometimes folks spend so much time sweating the small purchases (like the dang lattes) when really, it’s the big money moves—like refinancing—that can make the biggest difference over time.

If you’re interested in refinancing, you may want to look for a lender that’s offering competitive rates and great customer service.

That’s SoFi.

SoFi offers a regular mortgage refinance and a cash-out refinance.

Check your rate in two minutes.



SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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

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A Look into the Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness Program is a government program that was created with the College Cost Reduction and Access Act of 2007 .

The goal was to help professionals working in public service who have more federal student loans than their public sector salaries allow them to easily repay.

It’s aim is to ensure that the best and the brightest don’t feel as though they have to leave these important jobs to join corporate America just so they can pay down their student debt.

Stressed out about your debt and hoping you qualify? Here’s some things you need to know about being eligible and getting your student debt forgiven.

Who is Eligible for the Public Service Loan Forgiveness Program?

To qualify for Public Service Loan Forgiveness (PSLF), borrowers must meet the eligibility criteria. This includes:

Working for a Qualified Employer

Part of PSLF eligibility requires working for a qualified government organization (municipal, state, or federal organizations count) or a qualified 501(c)(3) organization is required. Full-time AmeriCorps or Peace Corps volunteers are also eligible for PSLF.

Some other types of non-profits also qualify, but not labor unions, political organizations, and most other non-profits that don’t qualify for 501(c)(3) status. Work for a government contractor? Unfortunately, that doesn’t cut it. You have to be working directly for the qualifying organization.

In addition to working for a qualifying organization, you have to work full-time. Generally, those who meet their employer’s definition of full-time or work a minimum of 30 hours per week. People employed at multiple qualifying organizations in a part-time capacity can also be considered full-time as long as you’re working a combined 30 hours per week.

Note that time spent working in religious instruction or worship does not count toward meeting the full-time requirement.

Having Eligible Loans

But working for the right type of employer is only half the battle. You also have to have eligible loans, which include any Direct loans such as Stafford loans, PLUS loans (but not Parent PLUS loans), and Federal Direct Consolidation loans.

If you want to have your Federal Family Education Loan (FFEL) or Perkins loans forgiven, you may be able to, however, you’d have to consolidate those loans into a Direct Consolidation Loan first. However, any payments you made on the FFEL Program loans or Perkins Loans before you consolidated won’t count towards the necessary payments.

Private student loans are not eligible for Federal forgiveness programs.

Applying for Public Service Loan Forgiveness

There are a few hoops to jump through in order to pursue PSLF. To apply for the program,

1. Consolidating any FFEL Program loans and Perkins loans you want forgiven into a Direct Consolidation Loan. This is necessary because if you consolidate your loans afterward, you won’t get credit for any qualifying payments you made on those loans. Already consolidated your Direct loans? Consider consolidating your Perkins Loans separately and start making new qualifying payments.

2. Signing up for an income-driven repayment plan .

There are four income-driven repayment plans to choose from; There’s Pay As You Earn, income-based repayment, income-contingent repayment, or Revised Pay as You Earn. This will likely allow you to pay less per month toward your loans than you would on the standard plan.

There are separate eligibility requirements for these plans, so be sure to check if you qualify.

3. Certifying your employment. To do this, print out an Employment Certification form and get your employer to fill it out and send it in for approval. The Federal Student Aid website suggests filling this form out annually or at least every time you switch jobs.

You can also use the Public Service Loan Forgiveness Help Tool to find qualifying employers and get the forms that you’ll need to fill out.

4. Making 120 qualifying monthly payments on your student loans while you’re employed by a qualified public service employer. What if you switch employers? So long as you are still working for a qualifying employer, you’ll still qualify.

5. After you make the final payment, you can apply for forgiveness. You fill out an application , send it in, and wait. Then (hopefully!) you can celebrate your loan forgiveness.

The Current State of the Program

Because the program was created in 2007, the first people to qualify to have their loans forgiven applied for forgiveness in September 2017. But while the Congressional Budget Office estimates that the program could cost just under $24 billion in the next 10 years , and the U.S. Government Accountability Office believes that more than four million student loan borrowers qualify for the program, some aren’t aware that it exists. And even more graduates have gotten bad information from loan servicers that rendered them ineligible.

In 2018, just 1% of applicants were approved for loan forgiveness through PSLF. In November 2020, the US Department of Education released updated information indicating that 2.4% of applicants have been approved for PSLF.

Pros and Cons of the Public Service Loan Forgiveness Program

The Advantages of the Program Are Pretty Straightforward:

1. Your balance of student loans are forgiven after a set time, which can be a relief. This works as a kind of bonus to make up for the low pay people working in the public sector may earn.

2. The amount forgiven usually isn’t considered income, so you aren’t taxed on it (that means you don’t have to save additional money to account for the IRS bill). There are other loan forgiveness programs that will forgive your loans, but you might see a big tax bill when they do.

3. You get rewarded for being a do-gooder (just like your mom promised you would). It will feel great to know that you’re making a difference, and your government appreciates it enough to give you a break on your federal student loans.

4. You may pay less monthly because you’re on an income-driven plan. This means paying out less of your hard-earned cash every month.

The Disadvantages of the Program Are That:

1. The program is only open to those with certain types of employers. And it’s contingent on you staying with a qualifying public service employer for 10 years, which might not be a guarantee.

2. Some people aren’t aware of the program, which is partly because of a lack of education by employers, loan servicers, and schools.

3. There are a lot of hoops to jump through to get your loans forgiven. Sounds fun, right? Plus, if you don’t jump through a hoop properly, you could jeopardize your forgiveness.

4. The extra money that could potentially be earned from working for a corporate employer may help you pay off your loans sooner than through PSLF.

5. You might end up paying more interest by making 120 payments than if you budgeted to aggressively repay your loans in less than 10 years. Also, if you enroll in the PSLF program and then stop working for a public service employer, you might be left with a larger loan to repay because of the interest that’s accumulated under the income-based repayment plan.

Alternatives to the Public Service Loan Forgiveness Program

Another program available to some individuals is the Teacher Loan Forgiveness program. This program is available to full-time teachers who have completed five consecutive years of teaching in a low-income school. This program also has strict eligibility requirements that must be met in order to receive forgiveness.

These federal forgiveness programs do not apply to private student loans. If you are looking for ways to reduce your interest rate or monthly payments on private student loans, refinancing with a private lender could be an option.

It is important to mention that refinancing your federal student loans with a private lender may make you ineligible for the Public Service Loan Forgiveness program should you choose that route.

The Takeaway

The Public Service Loan Forgiveness program can be one way for eligible borrowers to have their federal student loans forgiven. The program has stringent requirements that cna make successfully receiving forgiveness through PSLF challenging.

Refinancing is another option that can allow borrowers to secure a competitive interest rate on student loans. Refinancing federal loans eliminates them from borrower protections.

Interested in seeing if you qualify for a lower interest rate? Check out SoFi’s student loan refinancing to find out.



IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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