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Cannabis ETFs are funds that concentrate their holdings in the cannabis or marijuana industry. Investing in a single weed ETF could allow you to gain exposure to dozens of cannabis-related companies, without having to buy individual stocks. If you’re interested in cannabis investments, cannabis ETFs may add diversification to your portfolio, since exchange-traded funds or ETFs can offer exposure to a collection of investments in a single basket.

Learn more about ETFs as investments, and the specifics of investing in the marijuana industry.

What Are Cannabis ETFs?

Cannabis ETFs are exchange-traded funds that invest in companies that are connected to the cannabis industry. A marijuana ETF works the same way as any other type of ETF, in terms of how it’s traded, as they can be bought and sold on the stock market. As for how they work, ETFs pool money from multiple investors and trade on an exchange. All that sets a cannabis ETF apart from other ETFs is what it invests in; in this case, the cannabis industry.

There are only a handful of cannabis ETFs that trade in the U.S. which suggests that there may be room in the market for newcomers. The world’s first marijuana ETF, Global X Marijuana Life Sciences Index (HMMJ) was launched in Canada in 2017. The first U.S.-focused cannabis ETF landed in 2020, with the introduction of AdvisorShares’ Pure US Cannabis ETF (MSOS).

Marijuana legalization efforts have spurred interest in cannabis investments. At the time of writing, 24 states and the District of Columbia have legalized marijuana for recreational use. Sixteen states have legalized cannabis for medical use. Under federal law, marijuana remains illegal.

Recommended: Stock Market History

Understanding the Cannabis Industry

The cannabis industry is multilayered and diverse. Cannabis products are typically categorized according to their purpose and use.

Medical Cannabis

Medical marijuana is used to treat pain and symptoms of illness. It’s derived from the Cannabis sativa plant, which contains chemicals and active compounds. These chemicals, which include delta-9 tetrahydrocannabinol (THC) and cannabidiol (CBD), produce reactions in the brain and body that may help to ease pain or create psychoactive effects.

Doctors may prescribe medical marijuana for a variety of conditions, including:

•   Glaucoma

•   Crohn’s disease

•   Epilepsy/seizures

•   Multiple sclerosis

•   HIV/AIDS

•   Alzheimer’s disease

•   Amyotrophic lateral sclerosis (ALS)6

It can also be used as a form of pain management for people suffering from other chronic or terminal conditions.

Recreational Cannabis

Recreational or adult-use cannabis is cultivated for non-medical purposes. In terms of its composition, the underlying chemicals are the same but the strength of each one can vary. With recreational marijuana, there may be higher amounts of THC present. THC is the chemical that produces a “high” when using marijuana.

There’s also a difference in how recreational vs. medical marijuana is sold. Both can be sold at dispensaries but you may need a state-issued cannabis card to purchase the medical version. With recreational marijuana, you may just need a state-issued ID card proving that you’re old enough to make the purchase. Note that the laws regulating how, when, to whom, and even if any type of cannabis is sold varies from state to state.

Hemp and CBD Products

Hemp is any part of the Cannabis sativa plant that has a THC concentration of no more than 0.3%. CBD is derived from hemp products and is the second most active ingredient in marijuana.

The legality of hemp and CBD products varies from state to state. Legality typically ties into the concentration of THC present. Again, some states are more stringent than others.

Types of Companies in Cannabis ETFs

Cannabis ETFs vary in the underlying investments they hold. Some marijuana ETFs invest in a range of companies across different segments of the industry. Others choose to target a specific niche.

Typically, cannabis investing extends to companies that:

•   Grow, distribute, or sell marijuana (medical or recreational)

•   Conduct research into the chemical composition of marijuana and its range of uses

•   Have an ancillary connection to the industry or have substantial exposure to marijuana stocks

•   Marijuana ETFs may have many underlying holdings or few; reading the ETF’s prospectus can give you a better idea of how investments are concentrated.

For example, Cambria Cannabis ETF (TOKE) offers broad exposure that includes cannabis growers, cannabis retailers, and cigarette manufacturers. Amplify Alternative Harvest ETF (MJ), meanwhile, is largely focused on cannabis pharmaceutical companies.

Advantages of Investing in Cannabis ETFs

Since this is a relatively new asset class, there are some risks, but if your ETF picks perform well you could realize solid returns with marijuana investments.

Cannabis is a growing industry and investors have the opportunity to get in on the ground floor of new companies as they emerge. As legalization efforts expand, there may be more demand for growers, distributors, sellers, and pharmaceutical companies.

In terms of how much of your portfolio to invest in cannabis ETFs, it depends on your risk tolerance and diversification needs. You may start with a smaller allocation and increase it over time as you get comfortable with the cannabis ETF market and its risks. Keep in mind, however, that diversification can’t ensure profits or fully protect investments in a declining market.

Risks Associated with Cannabis ETFs

All investments have some risk, but cannabis ETFs tend to be more volatile. The market’s relative newness makes it more susceptible to pricing and trading fluctuations. Beyond that, there are legal and regulatory considerations to keep in mind.

Here are some things to weigh before investing in a marijuana ETF.

Regulatory and Legal Risks

Cannabis ETFs may be subject to greater scrutiny from the Securities and Exchange Commission (SEC) due to the nature of the underlying investments and the overall legality of marijuana. Weed ETFs must adhere to regulatory guidelines regarding the use of a custodian to hold assets, which can sometimes spell trouble if a fund is unable to find a willing custodian.

Aside from that, the legality of marijuana, hemp, and CBD products is not uniform across all 50 states and the various territories held by the U.S. For that reason, it’s important to do your due diligence to understand what you’re really investing in when you buy a cannabis ETF.

If a fund holds investments in cannabis companies that are operating illegally, that could put the entire ETF in jeopardy. Aside from that risk, certain jobs, including government jobs, may revoke your security clearance if you invest in marijuana stocks or ETFs.

Popular Cannabis ETFs in the Market

There are a handful of cannabis ETFs available for trade in the U.S., and those include:

•   AdvisorShares Pure US Cannabis ETF (MSOS)

•   Amplify Alternative Harvest ETF (MJ)

•   Cambria Cannabis ETF (TOKE)

•   Roundhill Cannabis ETF (WEED)

•   AdvisorShares MSOS Daily Leveraged ETF (MSOX)

Some of these ETFs have more than a dozen holdings while others have less than ten. They also vary with regard to dividends, returns, and expense ratios.

Factors to Consider When Choosing a Cannabis ETF

Choosing a cannabis ETF typically starts with researching and evaluating what type of cannabis companies you’d like exposure to. Once you narrow that down, you can then compare specific metrics for different funds, including:

•   Expense ratio. An expense ratio represents how much you’ll pay to own the fund annually. Typically, the lower this number is, the better.

•   Holdings. Holdings are what an ETF invests in. You’ll want to look at what a cannabis ETF owns and how much of the fund’s money is concentrated in each investment.

•   Trading volume and liquidity. Trading volume and liquidity can give you an idea of how in-demand a marijuana ETF is and how easy (or difficult) it will be to sell it when you’re ready to unload it.

It’s also helpful to consider the minimum investment required, if any, and the share price of the fund. If you have a limited budget for cannabis investing you’ll have to decide whether you want to spread your money across multiple funds or concentrate all of it in a single fund.

Recommended: How to Analyze a Stock

How to Invest in Cannabis ETFs

The simplest way to invest in cannabis ETFs is through a brokerage. If you don’t have a brokerage account, you can open one and start investing online. Before you do, take time to review the brokerage’s investment options to make sure you’ll have access to marijuana ETFs. Then consider the minimum account deposit required, if any, and the fees you’ll pay to trade.

Once your account is open and funded, you can begin buying cannabis ETF shares. If you skipped the previous step and haven’t researched any funds yet, you’ll want to backtrack and do that before you get started with trading.

Recommended: Shares vs. Stocks: What’s the Difference?

Tax Implications

ETFs held in a brokerage account are subject to capital gains tax if you sell them at a profit. There are two capital gains tax rates:

•   Short-term capital gains apply when you hold an investment for less than one year. The rate is equivalent to your ordinary income tax rate.

•   Long-term capital gains apply when you hold an investment for longer than one year. Capital gains tax rates range from 0% to 20%, with some exceptions.

If you’re trading cannabis ETFs it’s to your advantage to consider how selling them at a profit might affect your tax situation. You might consider holding them in a Roth IRA vs. a traditional brokerage account, which allows for tax-free distributions in retirement. Note, however, that you may incur a tax liability in some circumstances.

Investing in cannabis stocks or ETFs can be complicated because of the potential legal and tax considerations involved. You may consider consulting with a legal and tax professional who can advise you on your specific circumstances.

The Takeaway

Cannabis ETFs may help diversify your investment portfolio but it’s important to know the pros and cons. Specifically, there may be some legal and ethical concerns related to cannabis ETFs that investors should be aware of. It is also a relatively new industry, too, which means it may grow in the years ahead, but could be more volatile than other investments, exposing investors to a higher risk of loss.

And if you’re brand new to the market, learn how to invest in stock and build a portfolio from the ground up. You can explore different types of stocks, including marijuana stocks, to decide which investments align with your needs and goals.

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

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

¹The probability of a member receiving $1,000 is 0.028%. If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Members must fund their account with a minimum of $50.00 to qualify. The probability percentage is subject to decrease. Members are only eligible for the Stock Award promotion upon opening their first brokerage account; subsequent cash brokerage accounts are ineligible for the promo, including for members with multiple accounts.

FAQ

What sectors of the cannabis industry do these ETFs typically cover?

Cannabis ETFs can cover all sectors of the industry, including growers and distributors, pharmaceutical companies and researchers, and related businesses, such as tobacco manufacturers. Marijuana ETFs may offer exposure to companies that deal in recreational marijuana, medical marijuana, and/or hemp and CBD products.

How do regulatory changes affect cannabis ETFs?

Regulatory changes can affect demand for cannabis ETFs if legal changes make marijuana more accessible. On the other hand, regulators could add hurdles to marijuana investing by implementing changes that require cannabis ETFs to meet more stringent guidelines.

Are cannabis ETFs more volatile than traditional ETFs?

Cannabis ETFs may be more volatile than traditional ETFs since the industry is so new and there are still plenty of questions about legality and regulatory requirements. Knowing that going in can help you decide how much of your portfolio to commit to marijuana ETFs if you’re seeking to add possible diversification while still managing your risk exposure.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

Options involve substantial risk of loss and the possibility an investor may lose the entire amount invested. Before starting options trading, investors should be familiar with the Characteristics and Risks of Standardized Options . TTax implications with options should be considered. Consult your tax advisor to understand any impacts to your taxes.

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The three-legged stool analogy refers to the three sources of income investors can tap in retirement. Here’s a summary of each, and who has access.

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While most dividend-paying stocks do so every quarter, some companies make monthly dividend payments. Getting dividend payouts on a monthly schedule may appeal to investors, especially those relying on dividends for a steady income stream.

A dividend is a portion of a company’s earnings that it pays to shareholders on a regular basis. Many investors may seek out dividend-paying stocks as a way to generate income.

Note that there are no guarantees that a company that pays dividends will continue to do so.

Top 10 Monthly Dividend Stocks by Yield

Following are some of the top monthly dividend stocks by yield and performance, as of September 2026. The dividend yield reflects how much a company pays out in dividends annually relative to its current share price.

Note that this list changes month-to-month, and past performance is not indicative of future results.

Monthly Dividend Stocks	Ticker	Market Cap	P/E Ratio	Dividend Yield	1-Month Return	1-Year Return
ARMOUR Residential REIT Inc	ARR	$2.3 billion	4.36	17.85%	0.2%	26.1%
AGNC Investment Corp	AGNC	$12.5 billion	5.51	13.60%	0.6%	24.2%
Dynex Capital Inc	DX	$3.2 billion	14.46	16.00%	1.6%	19.6%
Apple Hospitality REIT Inc	APLE	$3.7 billion	21.75	6.06%	-3.9%	33.0%
Orchid Island Capital Inc	ORC	$1.3 billion	15.63	18.42%	2.2%	12.5%
LTC Properties Inc	LTC	$2.2 billion	40.99	5.47%	7.6%	21.9%
Healthpeak Properties Inc	DOC	$14.4 billion	46.56	5.82%	-2.7%	24.7%
Ellington Financial Inc	EFC	$1.7 billion	114.97	11.71%	0.9%	10.4%
EPR Properties	EPR	$4.6 billion	19.92	6.24%	-2.1%	19.8%
Realty Income Corp	O	$58.4 billion	37.99	5.27%	-2.4%	12.7%

Source: Data from SoFi and Bloomberg, as of September 2, 2026. Universe of stocks includes companies with market capitalization of at least $1B. Stocks ranked according to dividend yields and a blend of short-term and long-term performance factors.

ARMOUR Residential REIT Inc (ARR)

A REIT based in Maryland and with an office in Florida, ARMOUR Residential REIT Inc. Trades under the “ARR” ticker, and invests in residential mortgage-backed securities. It was also established in 2008.

AGNC Investment Corp (AGNC)

AGNC Investment Corp., trading under the “AGNC” ticker, is a Maryland-based REIT, founded in 2008. The REIT primarily invests in residential mortgage-backed securities, or assets that are backed up by residential home loans.

Dynex Capital Inc (DX)

In a very similar vein to AGNC Investment Corp, Dynex Capital – trading under the “DX” ticker – is a REIT that invests in residential mortgage-backed securities. It’s based in Virginia, and was established in 2008.

Apple Hospitality REIT Inc (APLE)

Apple Hospitality REIT Inc. owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the United States. Headquartered in Richmond, Virginia, and trading under the ticker “APLE,” the company focuses on investing in high-quality properties primarily affiliated with Marriott, Hilton, and Hyatt brands.

Orchid Island Capital Inc (ORC)

Orchid Island Capital Inc. trades under the “ORC” ticker, and has been publicly traded since 2013. It’s based in Vero Beach, Florida, and specializes in investing in leveraged residential mortgage-backed securities.

LTC Properties Inc (LTC)

LTC Properties Inc. dates back to 1992, and is a REIT focused on properties related to health care and senior living. It has 190 properties in 27 states, as of writing, and is based in California.

Healthpeak Properties Inc (DOC)

A Denver-based REIT, Healthpeak Properties Inc. trades under the clever “DOC” ticker, and was founded in 1985. It invests in buildings and properties involved in life sciences and medical fields, effectively giving it ownership over swaths of medical industry infrastructure.

Ellington Financial Inc (EFC)

Ellington Financial Inc. trades under the “EFC” ticker, and is a specialty finance company that’s based in Old Greenwich, Connecticut. It was founded in 1994, and invests in mortgage-related securities across residential and commercial properties.

EPR Properties (EPR)

EPR Properties, trading under the “EPR” ticker, allows investors to invest in “fun.” EPR Properties is a REIT that focuses on investing in properties such as theme and amusement parks, water parks, movie theaters, ski resorts — “experiential” properties. It was founded in 1997, and is based in Kansas City, Missouri.

Realty Income Corp (O)

With a single-character ticker like “O,” you know the company’s been around for a while! Realty Income Corp. trades under the “O” ticker, and was founded in 1969 in San Diego. It invests in various commercial properties — and got started with a single Taco Bell location.

What Are Monthly Dividend Stocks?

As mentioned above, dividend stocks usually pay out quarterly. However, some companies pay dividends monthly.

Stocks that pay dividends monthly may appeal to investors who want steady monthly income. Additionally, monthly dividend stocks may help investors who reinvest the payments to realize the benefit of compounding returns.

For example, through dividend reinvestment plans (DRIPs), investors can use dividend payouts to buy more shares of stock. Potentially, the more shares they own, the larger their future dividends could be.

How Does Dividend Investing Work?

Most dividends are cash payments made on a per-share basis, as approved by the company’s board of directors. For example, if Company A pays a monthly dividend of 30 cents per share, an investor with 100 shares of stock would receive $30 per month.

Some investors may utilize dividend-paying stocks as part of an income investing strategy. Retirees, for example, may seek investments that deliver a reliable income stream for their retirement. It’s also possible to reinvest the cash from dividend payouts.

A stock dividend is different from a cash dividend. Stock dividends are an increase in the number of shares investors own, reflected as a percentage. If an investor holds 100 shares of Company X, which offers a 3% stock dividend, the investor would have 103 shares after the dividend payout.

Understanding Dividend Yield

Understanding dividends is one part of an investor’s decision when choosing dividend-paying stocks. Another factor is dividend yield, which is the annual dividend amount the company pays shareholders divided by its stock price, and shown as a percentage.

If Company A pays 30 cents per share in dividends per month, that’s $3.60 per year, per share. If the share price is $50, to get the dividend yield you divide the annual dividend amount by the current share price:

$3.60 / $50 = 7.2%

The dividend yield can be useful as it can help an investor to assess the potential total return of a given stock, including possible gains or losses over a year.

But a higher or lower dividend yield isn’t necessarily better or worse, as the yield fluctuates along with the stock price. A stock’s dividend yield could be high because the share price is falling, which can be a sign that a company is struggling. Or, a high dividend yield may indicate that a company is paying out an unsustainably high dividend.

Investors will often compare a stock’s dividend yield to other companies in the same industry to determine whether a yield is attractive. Whether investing online or through a brokerage, it’s important to consider company fundamentals, risk factors, and other metrics when selecting any investment.

Types of Monthly Dividend Stocks

To invest in monthly dividend stocks, investors may want to consider companies in industries that tend to offer monthly dividend payouts. These companies usually have regular cash flow that can sustain consistent dividend payments.

Energy and Utility Companies

In the world of dividend payouts, utility and energy companies (e.g. water, gas, electricity) offer investors a certain consistency and reliability, thanks to the fact that consumer demand for utilities tends to be steady, and thus so is revenue.

Utility companies are considered a type of infrastructure investment, meaning that they provide systems that help society function. As such, these companies tend to be highly durable, offering tangible benefits to consumers and investors.

Also, many energy and utility companies may have little competition in a given region, which can add to the stability of revenue and thereby dividends.

ETFs

Just as an ordinary exchange-traded fund, or ETF, consists of a basket of securities, a dividend-paying ETF includes dividend-paying stocks or other assets. And similar to dividend-paying stocks, investors in dividend ETFs may benefit from regular monthly payouts, depending on the ETF.

Like most types of ETFs, dividend-paying funds are passive, meaning they track an index. In many cases, these ETFs seek to mirror indexes that include companies with a solid track record of dividend growth.

REITs

Real estate investment trusts (REITs) offer investors a way to buy shares in certain types of income-generating properties without the headache of having to manage these properties themselves.

REITs pay out dividends because they receive steady cash flow through rent payments and sometimes profits from the sale of a property. Also, these companies are legally required to pay at least 90% of their income to shareholders through dividends. Some REITs will pay dividends monthly.

Note: REIT payouts are ordinary dividends, i.e., they’re taxed as income, not at the more favorable capital gains rate.

Ways to Evaluate Monthly Dividend Stocks

Investors may want to analyze several criteria to determine the dividend stocks ideal for a wealth-building strategy. Here are a few things investors can consider when looking for the highest dividend stocks:

Dividend Payout Ratio

Investors will also factor in a stock’s dividend payout ratio when making investment decisions. This ratio expresses the percentage of income that a company pays to shareholders.

The dividend payout ratio is calculated by dividing a company’s total dividends paid by its net income.

Dividend payout ratio (%) = dividends paid / net income

Investors can also calculate the dividend payout ratio on a per share basis, dividing dividends per share by earnings per share.

Dividend payout ratio (%) = dividends per share / earnings per share

The dividend payout ratio can help determine if the dividend payments a company distributes make sense in the context of its earnings. Like dividend yield, a high dividend payout ratio may be good, especially if investors want a company to pay more of its profits to investors. However, an extremely high ratio can be difficult to sustain.

If a stock is of interest, it may help to check out the company’s dividend payout ratios over an extended period and compare it to comparable companies in the same industry.

Company Stability

Investors may also wish to focus on stable, well-run companies with a reputation for paying consistent or rising dividends for years. Dividend aristocrats – companies that have paid and increased their dividends for at least 25 years – and blue chip stocks are examples of relatively stable companies that are attractive to dividend-focused investors.

These companies, however, do not always have the highest dividend yields. Nor do these companies pay monthly dividends; most companies will pay dividends quarterly.

Furthermore, keep in mind a company’s future prospects, not just its past success, when shopping for high-dividend stocks.

Tax Implications

Dividends also have specific tax implications that investors should know.

•   A qualified dividend qualifies for the capital gains tax rate, which is typically more favorable than an investor’s marginal tax rate.

•   An ordinary dividend is taxed at an individual’s income tax rate, which is typically higher than the capital gains rate.

Investors will receive a Form DIV-1099 when $10 or more in dividend income is paid out during the year. If the dividends are in a tax-advantaged account, an IRA, 401(k), etc., the money will grow tax-free until it’s withdrawn. How dividends are taxed can vary depending on the asset type and circumstances. A tax and/or legal professional can help provide advice for your individual circumstances.

Recommended: Ordinary vs Qualified Dividends

Pros and Cons of Investing in Monthly Dividend Stocks

While dividend stocks offer some advantages, they also come with some risks and disadvantages investors must bear in mind.

Pros and Cons of Monthly Dividend Stocks
Pros	Cons
Provide passive income	Dividend payments are not guaranteed
Dividend reinvestment can lead to compound returns	Selecting monthly dividend stocks can be tricky
Investors may earn a return even when the stock price goes down	Dividends may be cut or reduced during a downturn
Qualified dividends have preferential tax treatment over ordinary dividends; they qualify for the capital gains tax rate	Some companies view dividends as tax inefficient
	Share price appreciation may be limited compared to growth stocks

Pros

•   Passive income. As noted above, investing in dividend stocks can provide a source of passive income (although dividends can be cut at any time).

•   The ability to reinvest. Dividend stocks allow for reinvestment (using dividend payments to buy more stocks, thus compounding returns). Steady dividends may also allow investors who reinvest the gains to buy stocks at a lower price while the market is down — similar to using a dollar-cost averaging strategy. Additionally, the stocks of mature companies that pay dividends also may be less vulnerable to market fluctuations than a start-up or growth stock.

•   Potential income during a downturn. Another plus for those who choose dividend stocks is that they may receive dividend payments even if the market falls. That can help insulate investors during tough economic times.

Recommended: Pros & Cons of Quarterly vs. Monthly Dividends

Cons

•   Dividends are not guaranteed. A company can decide to suspend or cut its dividends at any time. It could be that the company is truly in trouble or that it simply needs the money for a new project or acquisition. This may be especially true for monthly dividend stocks; many REITs that pay monthly dividends suspended or cut dividends during the Covid-19 pandemic. Either way, if the public sees the dividend cut as a negative sign, the share price could fall. And if that happens, an investor could suffer a double loss.

•   Tax inefficiency. First, a corporation must pay tax on its earnings, and then when it distributes dividends to shareholders (which are considered profit-after-tax), the shareholder also must pay tax as an individual. Owing to this tax inefficiency, sometimes referred to as a type of double taxation, some companies decide not to offer dividends and find other ways to pass along profits. Note that this tax issue doesn’t impact REITs the same way. Entities such as REITs and Master Limited Partnerships (MLPs) pass along most of their profits to investors. In these cases, the company doesn’t owe tax on the profits it passes onto the investor.

•   Limited options. Also, choosing the right dividend stock can be tricky. First, monthly dividend stocks aren’t as common as quarterly dividend payouts. And the metrics for analyzing attractive dividend stocks are quite different from those for selecting ordinary stocks.

•   Dividends can drop or be cut. It’s important to remember that dividends may fluctuate depending on how a company is performing, or how it chooses to distribute its profits. During a downturn, it’s possible to see lower dividends, or for a company to cut its dividend payout.

•   Share price appreciation may be limited. Gains in the share price of some dividend stocks can be limited, as many dividend-paying companies are typically not in a rapid growth phase.

Things to Avoid When Investing in Monthly Dividend Stocks

When investing in monthly dividend stocks, there are a few things to avoid:

•   Avoid investing in a company that pays a monthly dividend solely to pay a monthly dividend. Many companies pay monthly dividends, but not all are suitable investments. Do your research and only invest in companies that you believe will be successful in the future.

•   Avoid investing in a company or industry that you don’t understand. If you don’t understand how a company makes money, you should hesitate to invest in it.

•   Avoid investing all of your money in monthly dividend stocks. Many investors diversify their portfolio by investing in other types of stocks, bonds, funds, and other securities, which may help decrease risk and exposure to volatility. Diversification can’t, however, guarantee profits or fully protect investments from market declines.

The Takeaway

Dividend-paying stocks can be desirable. They can add to your income, or offer the potential for reinvestment via dividend reinvestment plans or other strategies you pursue to support your financial goals. Monthly dividend stocks offer the potential for steady income, but they are less common than stocks that pay on a quarterly basis.

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.

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

FAQ

How do monthly dividend stocks work?

A monthly dividend stock is a stock that pays out dividends every month instead of the more common quarterly basis. This can provide investors with a supplemental stream of income, which can be particularly helpful if you rely on dividends for living expenses.

How can you get stocks that pay monthly dividends?

To invest in stocks that pay monthly dividends, you need to research financial websites and publications to find companies that pay dividends monthly. There are not many monthly dividend stocks, especially compared with stocks that pay quarterly dividends.

How can you determine the stocks that pay the highest monthly dividends?

Investors use metrics like the dividend yield and dividend payout ratio to determine the stocks that might be most desirable. However, stocks that pay the highest monthly dividends can change over time, and it’s important to consider other methods of assessing a stock, since a higher dividend isn’t always a sign of company health.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

Options involve substantial risk of loss and the possibility an investor may lose the entire amount invested. Before starting options trading, investors should be familiar with the Characteristics and Risks of Standardized Options . TTax implications with options should be considered. Consult your tax advisor to understand any impacts to your taxes.

Before investing, carefully consider the investment objectives, risks, charges, and expenses detailed in a Fund’s prospectus. This document contains important information and must be read carefully prior to investing; you can find the current prospectus by clicking the link on the Fund’s respective page.
Alternative investments are highly risky and may not be suitable for all investors. These investments often involve leveraging, speculative practices, and the potential for complete loss of investment. They typically charge high fees, lack diversification, and can be highly illiquid and volatile. Be aware that both registered and unregistered alternative investments, including Interval Funds, are not subject to the same regulatory requirements as mutual funds, and their illiquid nature may restrict your ability to trade on your timeline. Always review the specific fee schedule for Interval Funds within their prospectus.

Dollar Cost Averaging (DCA): Dollar Cost Averaging (DCA) is an investment strategy where you regularly invest a fixed amount of money regardless of market conditions. This approach aims to reduce the impact of market volatility and lower your average cost per share over time. DCA does not guarantee a profit or protect against losses in declining markets. Investors should consider their financial goals and risk tolerance before using this strategy, understanding that past performance is not indicative of future results. Consult with a financial advisor to determine if DCA is appropriate for your individual circumstances.

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The Russell 2000 Index is a stock market index that tracks approximately 2,000 small-capitalization (small-cap) U.S. companies. It represents the small-cap segment of the broader Russell 3000 Index, which measures the performance of roughly 3,000 of the largest publicly traded U.S. companies. Because it focuses on smaller companies, the Russell 2000 Index is widely used as a benchmark for the U.S. small-cap stock market. Investors can also use funds that track the index to gain exposure to a broad group of small-cap stocks.

Understanding the Russell 2000 Index

A stock market index is a tool that tracks a specific group of stocks to measure how a segment of the market — or the broader market — is performing. Instead of looking at thousands of individual companies, you can look at an index to get a general sense of whether a particular segment of the market is rising or falling.

The Russell 2000 Index tracks approximately 2,000 small-cap companies and is designed to represent a broad cross-section of the U.S. small-cap equity market. A company’s market capitalization is the total market value of its outstanding shares. It’s generally calculated by multiplying the current share price by the number of outstanding shares.

The Russell 2000 was created and is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG). Many exchange-traded funds (ETFs) and mutual funds track the Russell 2000 or use it as a benchmark.

How the Index Is Constructed

The Russell 2000 is a subset of the broader Russell 3000. The Russell 3000 Index includes approximately 3,000 of the largest eligible U.S. companies by market cap and is designed to represent about 98% of the U.S. investable equity market. It includes large-, mid- and small-cap stocks. The Russell 1000 consists of the largest 1000 companies in the Russell 3000, while the Russell 2000 consists of the next 2,000 companies.

The Russell 2000 is market-capitalization-weighted, meaning companies with larger market capitalizations generally have a greater effect on the index than small companies. The index uses a free-float adjusted approach, which takes into account the shares that are available for public trading.

FTSE Russell regularly recalibrates the Russell U.S. indexes to account for changes in company size and eligibility. Beginning in 2026, the index moved from an annual reconstitution to a semi-annual reconstitution in June and December. Eligible initial public offerings (IPOs) are also added quarterly.

Top Russell 2000 Companies by Weight

According to the FTSE Russell Index factsheet, these were the top ten individual constituents in the Russell 2000 Index as of July 31 2026:

•   Moog Inc. (Industrials)

•   Hut 8 Corp. (technology)

•   UMB Financial Corporation (financials)

•   Cytokinetics, Inc. (health care)

•   Viasat, Inc. (telecommunications)

•   BrightSpring Health Services, Inc. (health care)

•   Glaukos Corporation (health care)

•   CareTrust REIT, Inc. (real estate)

•   Old National Bancorp (financials)

•   Brinker International, Inc. (consumer discretionary)

Russell 2000 vs S&P 500 and Other Indexes

The Russell 2000 Index differs from large-cap indexes such as the S&P 500 and the Dow Jones Industrial Average because it focuses on smaller U.S. companies within the U.S. stock market. Small-cap stocks can experience greater price fluctuations than large-cap stocks, so the Russell 2000 has historically tended to be more volatile than large-cap benchmarks.

Compared to the technology-heavy Nasdaq Composite, the Russell 2000 generally provides exposure to a broader mix of industries. Sectors represented in the index include financial, health care, real estate, telecommunications, and consumer discretionary companies.

Here’s a quick comparison of several major stock indexes:

•   Russell 2000: Tracks approximately 2,000 small-cap U.S. companies, with an average market cap around $4 billion.

•   S&P 500: Tracks approximately 500 large-cap U.S. companies and is widely used as a benchmark for large-cap U.S. stocks.

•   Nasdaq Composite: Tracks roughly 3,000 stocks (both large and small) listed on the Nasdaq Stock Market and has a relatively large concentration in technology and other growth-oriented companies.

•   Dow Jones Industrial Average: Also known as the Dow, this price-weighted index tracks 30 large, established U.S companies across multiple industries.

What the Russell 2000 Tells Us About the Economy

The Russell 2000 is sometimes viewed as an indicator of how smaller U.S. companies are responding to economic conditions. Small businesses can be particularly sensitive to changes in consumer demand, borrowing costs, wages, and other operating expenses.

However, the Russell 2000 generally shouldn’t be used as a direct measure of the overall health of the U.S. economy. The companies in the index operate across many industries and can have different levels of exposure to domestic and international markets. In addition, stock prices reflect investors’ expectations about future business conditions as well as current economic conditions.

How to Invest in the Russell 2000

You cannot invest directly in a market index. However, you can buy shares of an ETF or mutual fund designed to track the Russell 2000 through a brokerage account, including self-directed investing accounts and robo-advisors. These funds provide exposure to many of the companies in the index through a single investment.

For investors interested in Russell 2000 funds, here are the basic steps:

Step 1: Open a Brokerage Account

If you don’t already have a brokerage account, you’ll need to choose a brokerage firm or investing app. It’s wise to shop around and compare factors such as account fees, investment choices, trading costs, and whether fractional-share trading is available.

Step 2: Choose a Russell 2000 ETF or Mutual Fund

Two common ways to gain exposure to the Russell 2000 are through an ETF or an index mutual fund that tracks the index.

ETFs trade through the day during market hours, with their prices changing as the market moves. They generally charge an expenses ratio, which is an annual fee expressed as a percentage of the fund’s assets.

Index mutual funds pool money from many investors to purchase a portfolio designed to track a particular index. Unlike ETFs, mutual funds are generally bought and sold at the fund’s net asset value (NAV), which is calculated once per trading day.

Before choosing a fund, it’s a good idea to compare factors such as its expense ratio, how closely it tracks the index, and any account or transaction fees.

Step 3: Determine Your Investment Amount

Consider how much you want to allocate to a Russell 2000 fund based on your financial situation, investment goals, time horizon, and tolerance for market volatility. Because small-cap stocks can experience significant price fluctuations, you’ll want to consider how this type of exposure fits into your broader portfolio.

You may have the option to make a one-time purchase or establish a recurring investment schedule. If your budget is limited, check whether your brokerage allows you to purchase fractional shares of a fund.

Recommended: Investment Calculator

Step 4: Execute Your Trade

Enter the ticker symbol for the fund you want to purchase, then select the type of order you want to place. A market order generally executes at the best available price, while a limit order allows you to specify the maximum price you are willing to pay.

Enter the number of shares or dollar amount (if supported by your brokerage) you want to purchase, review your order, then submit the trade.

The Takeaway

The Russell 2000 is a widely followed benchmark for U.S. small-cap stocks. It tracks approximately 2,000 companies and provides exposure to a broad range of industries, although small-cap stocks can be more volatile than large-cap stocks. The index is also regularly updated as companies grow, shrink, or otherwise become eligible or ineligible for inclusion.

If you’re considering a Russsell 200 fund, understand how the index works, compare available funds and consider how small-cap exposure fits with your overall financial goals and tolerance for market fluctuations.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest®. You can trade stocks, ETFs, or options through self-directed investing with SoFi Securities, or simply automate your investments with a robo advisor from SoFi Wealth. You'll gain access to alternative investments and upcoming IPOs, and can plan for retirement with a tax-advantaged IRA. With SoFi, you can manage all your investments, all in one place.

Take a step toward reaching your financial goals with SoFi Invest.

FAQ

What is a good alternative to the Russell 2000?

One alternative to the Russell 2000 is the S&P SmallCap 600, which tracks small-capitalization stocks meeting Standard & Poor’s criteria for liquidity and stability. Unlike the Russell 2000 Index, the S&P 600 covers a relatively small group of stocks (approximately 600) and has stricter inclusion criteria, such as specific positive-earnings and liquidity requirements.

Are small-cap stocks riskier than large-cap stocks?

Small-cap stocks can be riskier than large-cap stocks. They may experience higher price volatility since smaller companies tend to have less stable revenues and limited financial reserves to survive economic downturns. While small-caps can provide significant long-term growth potential, they generally carry a higher risk of capital loss.

Does the Russell 2000 index pay dividends?

You cannot invest directly in the Russell 2000 index itself, so the index does not pay dividends directly to investors. However, you can gain exposure to the index by purchasing shares of exchange-traded funds (ETFs) or mutual funds that track its performance. Because many of the underlying small-cap companies within the index pay dividends, the funds tracking it historically pass these aggregated yields along to shareholders, typically via quarterly distributions.

How often do companies enter or leave the index?

FTSE Russell recalibrates the index to account for changes in company size and eligibility. As of 2026, the index moved from an annual reconstitution to a semiannual reconstitution, which occurs in June and December. Additionally, eligible initial public offerings (IPOs) are added to the index on a quarterly basis.

Can you buy the Russell 2000 directly?

No, you cannot invest directly in a market index. The index serves as a measurement tool rather than a tradable asset. However, you can buy shares of an exchange-traded fund (ETF) or index mutual fund designed to track the Russell 2000 through a brokerage account, which provides exposure to many of the companies included in the index.

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If you’re considering adding bonds to your portfolio, it’s important to understand the difference between a bond’s coupon rate and its yield. While both can help you evaluate a bond, they measure different things.

A bond’s coupon rate is the fixed annual interest rate established when the bond is issued. Yield, on the other hand, reflects the return an investor can expect based on the bond’s current market price. Because bond prices can rise and fall after issuance, a bond’s yield can change over time even though its coupon rate stays the same.

Understanding how coupon rates and yields work together can help you compare bonds, evaluate potential returns, and make more informed investment decisions.

What Is a Bond Coupon Rate?

A bond’s coupon rate is the annual interest rate the issuer agrees to pay investors. It’s expressed as a percentage of the bond’s face value (also called par value). For example, if a bond has a face value of $1,000 and a coupon rate of 5%, the bondholder receives $50 in interest each year.

Bonds typically pay interest semiannually, although some issuers may make payments monthly, quarterly, or annually. A higher coupon rate generally means larger interest payments, but it doesn’t necessarily make a bond a better investment. Higher coupon rates often reflect greater risk, such as lower credit quality or longer maturities.

Issuers typically determine coupon rates based on several factors:

Once a bond is issued, its coupon rate remains fixed until maturity.

How to Calculate Coupon Rate

Calculating a bond’s coupon rate requires two figures:

The formula is:

For example, if a bond has:

The calculation is:

Although the coupon rate formula is straightforward, investors may use financial calculators or online tools to estimate potential growth, compare different scenarios, and see how factors such as the initial investment amount, time horizon, and assumed rate of return can affect possible outcomes.

Whether a coupon rate is considered attractive depends on current interest rates, inflation expectations, the issuer’s creditworthiness, and the bond’s maturity.

What Is Bond Yield?

Bond yield measures the annual income a bond generates relative to its current market price. Unlike a bond’s coupon rate, which is fixed when the bond is issued, yield can change throughout the bond’s life as its market price fluctuates.

When a bond is first issued and is sold at its face value, its yield is generally the same as its coupon rate. However, bonds can trade above or below their original price in the secondary market, causing their yields to rise or fall.

Several factors influence bond yields, including:

The yield that may be considered “good” varies depending on the bond’s risk profile. For example, high-yield bonds (or junk bonds) often offer higher yields because they carry a greater risk of default than investment-grade corporate or government bonds.

Another metric commonly used to evaluate bonds is yield to maturity (YTM). Unlike current yield, YTM estimates a bond’s total annualized return if you purchase it at today’s market price and hold it until maturity, accounting for all remaining interest payments and the repayment of principal.

How to Calculate Current Yield

The formula for current yield is straightforward:

Unlike the coupon rate calculation, which uses a bond’s face value, current yield uses the price an investor would pay to purchase the bond today.

This illustrates the relationship between bond price and yields: When a bond’s price increases, its yield decreases, and when its price falls, its yield increases.

Recommended: Understanding Lower-Risk Investments in Today’s Market

Key Differences Between Coupon Rate and Yield

While coupon rate and yield are related, they measure different aspects of a bond’s return.

	Coupon Rate	Yield
What it measures	Fixed annual interest paid based on face value	Return based on current market price
Fixed or variable?	Fixed for the life of the bond	Changes as market prices fluctuate
Affected by market prices?	No	Yes
Formula	Annual coupon payment ÷ Face value	Annual coupon payment ÷ Current market price

Why Do Bond Yields Change?

Bond yields change because bond prices change. Unlike the coupon rate, which remains fixed after issuance, yield reflects what investors are willing to pay for a bond at any given time.

Market sentiment, supply and demand, inflation expectations, economic conditions, and interest rate changes all influence bond prices and, in turn, bond yields.

Understanding these relationships can help investors better evaluate whether a bond’s current price represents a favorable opportunity.

Market Interest Rates and Inflation

Interest rates and inflation are two of the biggest factors affecting bond yields.

When interest rates rise, newly issued bonds typically offer higher coupon rates. Existing bonds with lower coupon rates may become less attractive, generally causing their market prices to fall. As prices decline, their yields rise.

Conversely, when interest rates fall, existing bonds with higher coupon rates may become more attractive. Increased demand can push their prices higher, which lowers their yields.

Inflation can have a similar effect. Because inflation reduces the future purchasing power of a bond’s interest payments and principal repayment, investors may demand higher yields to compensate for that loss. Persistent inflation may also prompt central banks to raise interest rates, putting additional upward pressure on bond yields.

Recommended: What Are Callable Bonds?

Which Matters More: Coupon Rate or Yield?

Neither measure is inherently more important — the better metric depends on what you’re trying to evaluate.

The coupon rate may matter more if you:

Yield may matter more if you:

For many investors, considering both metrics together can provide a more complete picture of a bond’s income potential and overall value.

How Investors Buy Bonds

Investors can buy individual bonds through some brokerage accounts, directly from issuers, or, in the case of U.S. Treasury bonds, directly from the government. Alternatively, you can gain broad bond exposure by investing in bond mutual funds or exchange-traded funds (ETFs).

While individual bonds pay a set coupon rate and return your principal at a specific maturity date, bond funds hold a shifting collection of securities and generally do not mature. Instead, fund managers continuously buy and sell bonds, which means the overall fund yield fluctuates constantly as market prices change.

The Takeaway

A bond’s coupon rate and yield each provide useful — but different — information. The coupon rate tells you how much interest the issuer pays based on the bond’s face value, while yield shows the return you may earn based on the price you pay for the bond. Looking at both can help you compare bonds more effectively, understand how changing market conditions affect potential returns, and choose investments that align with your income goals and risk tolerance.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest®. You can trade stocks, ETFs, or options through self-directed investing with SoFi Securities, or simply automate your investments with a robo advisor from SoFi Wealth. You'll gain access to alternative investments and upcoming IPOs, and can plan for retirement with a tax-advantaged IRA. With SoFi, you can manage all your investments, all in one place.

Take a step toward reaching your financial goals with SoFi Invest.

FAQ

What is a zero-coupon bond?

A zero-coupon bond is a bond that doesn’t make periodic interest payments. Instead, it’s sold at a discount to its face value and pays its full face value when it matures. The difference between the purchase price and the amount received at maturity represents the investor’s return. Because there are no coupon payments, zero-coupon bonds don’t have a coupon rate like traditional bonds, though they do have a yield based on their purchase price and time to maturity.

Why does bond yield change while the coupon rate stays fixed?

A bond’s coupon rate is set when the bond is issued and generally doesn’t change over its life. Bond yield, however, is based on the bond’s current market price. If interest rates or market demand cause the bond’s price to rise or fall, its yield changes as well. Because bond prices fluctuate in the secondary market, yields can increase or decrease even though the coupon payments remain the same.

What happens if the coupon rate is higher than the yield?

If a bond’s coupon rate is higher than its current yield, the bond is typically trading above its face value (at a premium). Although the annual coupon payments stay the same, the investor pays more to buy the bond, reducing the return relative to the purchase price. This is common when the bond’s coupon rate is higher than prevailing market interest rates.

Should I focus on a higher coupon rate or a higher yield?

It depends on your investment goals. A higher coupon rate generally means larger fixed interest payments based on the bond’s face value, which may appeal to investors seeking steady income. A higher yield reflects the bond’s return based on its current market price and can be more useful when comparing bonds available for purchase today. Looking at both measures together provides a more complete picture of a bond’s potential value.

How does the secondary market affect bond yield?

The secondary market is where investors buy and sell existing bonds after they’re issued. As supply, demand, and interest rates change, bond prices can rise or fall. Because yield is calculated using the bond’s current market price, a lower price increases yield, while a higher price lowers yield. The bond’s coupon payments don’t change, but its yield adjusts to reflect what new buyers would earn at the current price.

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