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Sep

2025

What is a Cash Account? Margin vs Cash Account

Cash Account vs Margin Account: Key Differences

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

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

Table of Contents

What Is a Cash Account?
Cash Account Regulations to Be Aware Of
A Benefit of a Cash Account: Lending
What Is a Margin Account and How Does It Work?
Margin Account Requirements
Margin Account vs Cash Account
Should You Choose a Margin Account or a Cash Account?
FAQ

A cash account requires the use of cash to buy and sell securities, whereas a margin account enables traders to borrow funds (also known as using leverage) to take bigger positions.

Trading on margin is effectively a way of taking out a loan from the brokerage, which must be repaid with interest. Investors must qualify to open a margin account; these are not available to all investors as using leverage increases the level of investment risk.

There are reasons for choosing either account, and it’s important for investors to understand them both in order to make the best decision for their own financial goals.

Key Points

• A cash account permits the use of cash to buy securities.

• A margin account permits qualified investors to borrow funds to take bigger positions.

• Margin can amplify returns as well as losses, so the risk level is higher.

• Margin loans must be repaid, with interest.

• In addition, margin accounts are tightly regulated, and investors must be approved to use margin.

What Is a Cash Account?

A cash account is an investment account with a brokerage firm that requires investors to purchase securities using the cash balance in that account at the time of settlement. With a cash account, investors can’t borrow money from the broker, and they can’t take short positions on margin.

Securities trades in a cash account now settle in one business day (T+1), according to Securities and Exchange Commission (SEC) rules that took effect in 2024.

How Does a Cash Account Work?

Cash accounts allow both institutional and retail investors to buy securities using whatever amount of money they put into their account. For instance, if an investor deposits $3,000 into their account, they can purchase $3,000 worth of securities.

Pros and Cons of a Cash Account

The main advantage of a cash account is that investors can’t go into debt to their broker using one, as they might with a margin account. They have no borrowing ability, and thus, can only lose the amount they trade. Using a cash account to buy stocks online or through a traditional broker can provide a much simpler experience for beginner investors as well.

As for the downsides, a cash account does not allow investors to utilize leverage (as they would with a margin account) to potentially take bigger positions. Investors are more or less tied to their cash balance, and may be limited in what they can do without using margin.

Cash Account Regulations to Be Aware Of

There are several regulations that investors should keep in mind when it comes to cash accounts.

Cash Liquidation Violations

Trades generally take one business day to settle, so investors should always sell securities before purchasing new ones if they are using that money for the purchase. If there is not enough cash in the account to pay for a purchase, this is called a “cash liquidation violation,” under Regulation T.

While Reg T primarily regulates margin accounts, it also prohibits certain activity in cash accounts. For example, an investor cannot use a cash account to buy a stock then sell it before the trade settles.

Good Faith Violation

A Good Faith Violation occurs when an investor buys a security, buys another security, then sells it to cover the first purchase when they don’t have enough cash in their account to cover the purchase.

Freeriding Violation

In this type of violation, an investor doesn’t have cash in their account, and they attempt to purchase a security by selling the same security.

A Benefit of a Cash Account: Lending

One benefit of cash accounts is that investors can choose to lend money from their account to hedge funds, short sellers, and other types of investors. The account holder can earn interest or income from lending, known as securities lending or shares lending.

If a cash account holder wants to lend out cash or shares, they can let their broker know, and the broker will provide them with a quote on what borrowers will pay them. Securities that earn the highest interest rates are those in low supply and high demand for borrowers who are trading stocks.

These tend to be securities with a lower trading volume or market capitalization. If an investor lends shares of securities, they can earn interest while continuing to hold the security and earn on it as it increases in value. Account holders may need to meet minimum lending requirements.

What Is a Margin Account and How Does It Work?

Using a margin account, an investor can deposit cash, and they can also borrow money from their broker. This allows investors to use leverage to buy larger amounts of securities than a cash account allows. But if the value of the trade goes down, the investor will face a loss, plus they have to repay the margin loan.

Margin accounts also charge interest, so any securities purchased need to increase above the interest amount for the investor to start seeing a profit. Different brokers charge different interest rates, so it’s a good idea for investors to compare before choosing an account.

Usually there is no deadline to repay a margin loan, but the debt accrues interest each month, so the longer an investor waits, the more they owe. The securities held in the account act as collateral for the margin loan, so if needed they can be used to pay it off.

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Margin Account Requirements

Other requirements generally associated with margin accounts include the following:

Minimum Margin

Investors must deposit a minimum amount of cash into their account before they can start investing and borrowing. Each broker may have a different minimum, but the Financial Industry Regulatory Authority (FINRA) requires investors to have either $2,000 or 100% of the purchase amount of any securities the investor wants to buy on margin, whichever amount is lower.

Initial Margin

Under Regulation T (Reg T), which serves to limit how much investors may borrow in a margin account, investors can only borrow up to 50% of the purchase amount of securities they want to buy. For example, if an investor with $3,000 in their account wishes to purchase $6,000 worth of securities, they would be able to borrow the additional $3,000.

Maintenance Margin

Both before and after purchasing securities, investors must hold a certain amount in their account as collateral — known as maintenance margin. The investor must own at least 25% of the assets (cash or securities) in their account when they have taken out a margin loan.

If the amount in the account dips below this level, the investor may receive a margin call, requiring them to either deposit more cash into their account or sell some of their securities. This could occur if the investor withdraws too much from their account or if the value of their investments decreases. This is one of the main risks of margin accounts.

Margin Account vs Cash Account

There are some similarities between margin accounts and cash accounts, but there are some key differences in terms of the monetary requirements that investors should consider when choosing which type of brokerage account works best for them.

The type of account you choose will have an impact on the amount of money you’re able to invest, and the risk level that accompanies it.

The accounts can be equated to a debit card vs. a credit card. A debit card requires the user to have funds available in their account to pay for anything they buy, while a credit card allows a user to spend and pay back the expense later.

Similarities Between Margin and Cash Accounts

Both are brokerage accounts that allow investors to purchase securities, bonds, certain mutual funds, stocks, and other assets in addition to holding cash. (You typically can’t have a margin account in a retirement account such as an IRA or Roth IRA.)

Differences Between Margin and Cash Accounts

Margin accounts allow investors to borrow from their broker and typically require a minimum deposit to get started investing, while cash accounts don’t. However, margin accounts usually don’t come with additional fees.

On the other hand, cash account holders may only purchase securities with cash or settled funds, and cash accounts don’t allow short selling, or shorting stocks.

Should You Choose a Margin Account or a Cash Account?

Although being able to borrow money with a margin account has benefits in terms of potential gains, it is also risky. Cash accounts tend to be easier to maintain.

Reasons to Consider a Cash Account

• For this reason, cash accounts may provide an option for beginner investors, who may find it easier to invest only the money they have. For example, with a cash account, the value of securities can rise and fall, and the investor doesn’t have to deposit any additional funds into their account or sell securities at a loss.

• Cash accounts may be an option for long-term investors, since investments in a margin account may go down and force the investor to have to sell some of them or deposit cash to maintain a high enough balance in their account. This could result in an investor being forced to sell a security at a loss and missing its potential price recovery.

• Investors may also choose a cash account if they want to “set it and forget it,” meaning they invest in securities that they don’t want to keep an eye on all the time since they will never owe the broker more money than they invested — as discussed.

The risk level on a cash account will always be lower than with a margin account, and there are less risky ways to increase returns than by using margin.

Reasons to Consider a Margin Account

On the other hand, for investors interested in day trading, margin accounts may be a great choice, since they allow the investor to double their purchasing power. They also allow investors to short trade. Margin account holders can borrow money to withdraw to pay for any life expenses that need to be paid off in a rush.

Since there is no deadline to pay off the loan, the investor can pay it back when they can, unless the value of the stocks fall. Traders can also borrow money to buy stocks when the market is down or to help prevent paying capital gains taxes, but this requires more experience and market knowledge.

Margin accounts provide flexibility for investors, who can choose to use them in exactly the same way as a cash account.

The Takeaway

The main difference between cash accounts and margin accounts is that margin accounts allow investors to borrow money from their brokers, amplifying potential trades and risk. This can have advantages and disadvantages, and depending on their specific strategy and goals, investors should consider these before deciding to use one or the other.

Both cash and margin accounts are commonplace in the investing space, and investors are likely to run across both — and figure out which is a best fit for their strategy. It may be beneficial to speak with a financial professional for guidance.

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

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FAQ

Can you trade options on cash and margin accounts?

Yes, but advanced options trading strategies require a margin account to trade. For example, buying options may not require margin because the main risk is losing the premium paid, but selling certain types of options may require margin as collateral.

Should a beginner use a cash or margin account?

It may be more straightforward for a beginner to start out using a cash account to invest, as they’re simpler and involve less risk than a margin account. If a beginner uses a margin account without a proper understanding of margin, they could find themselves owing their broker money.

Can you have a cash account and a margin account at the same time?

Yes, you can have cash and margin accounts at the same time, often at the same brokerage. It’s possible to also have different types of accounts at different brokerages or on different investment platforms.

Photo credit: iStock/PeopleImages

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

SOIN-Q325-107

Sep

2025

What Causes a Stock Market Bubble?

By Inyoung Hwang | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is a Stock Market Bubble?
The Five Stages of a Market Bubble
FAQ

Stock market bubbles occur when speculative trading and investing, fueled by what could be called irrational exuberance, leads to big increases in values for certain assets. Those value increases may not necessarily be supported by much more than market euphoria, and assets can become overvalued. Eventually, the bubble “pops,” and asset values fall.

Market bubbles occur from time to time, and they aren’t always easy to recognize. They can have different causes, too. In all, it’s important for investors to understand what they are, how they happen, and how they can protect their portfolios from an eventual bubble burst.

Key Points

• A stock market bubble progresses through five stages: displacement, boom, euphoria, profit-taking, and panic.

• Speculative investing drives rapid price increases, often outpacing actual value, creating a self-reinforcing cycle.

• Irrational exuberance leads to overvaluation and increased market participation, fueled by media attention and new financial instruments.

• Investing during the bubble phase risks significant losses due to overvaluation and unpredictable market volatility.

• Recognizing and managing volatility is essential to avoid entering at the peak and to make informed investment decisions.

What Is a Stock Market Bubble?

A stock market bubble is often caused by speculative investing. As investors bid up the stock price, it becomes detached from its real value. Eventually, the bubble bursts, and investors who bought high and didn’t sell fast enough are left holding shares they overpaid for.

Stock market bubbles are notoriously difficult to spot, but they’re famous for potentially causing large-scale consequences, such as market crashes and recessions.

For investors on an individual level, entering the market in the later stages of a bubble could mean painful losses. But misdiagnosing a stock market bubble or exiting from positions too early can result in an investor missing out on potential gains.

The Five Stages of a Market Bubble

Modern-day investors and market observers typically categorize market bubbles based on the principles of Hyman P. Minsky, a 20th century economist whose financial-instability hypothesis became widely cited after the 2008 financial crisis.

Minsky debunked the notion that markets are always efficient. Instead, he posited that underlying forces in the financial system can push actors — such as bankers, investors and traders — toward making bad decisions.

Minsky’s work discussed how bubbles tend to follow a pattern of human behavior. Below is a closer look at the five stages of a bubble cycle:

1. Displacement

Displacement is the phase during which investors get excited about something, typically a new paradigm such as an invention like the Internet, or a change in economic policy, like the cuts to short-term interest rates during the early 2000s by Federal Reserve Chair Alan Greenspan.

2. Boom

That excitement for a new paradigm next leads to a boom. Prices for the new paradigm rise, gradually gathering more momentum and speed as more and more participants enter the market. Media attention also rapidly expands about the new investing trend.

This phase captures the initial price increases of any potential bubble. For instance, after Greenspan cut interest rates in the early 2000s, real-estate prices and new construction of homes boomed. Separately, after the advent of the Internet in the 1990s, shares of technology and dot-com companies began to climb.

3. Euphoria

The boom stage leads to euphoria, which in Minsky’s credit cycle has banks and other commercial lenders extending credit to more dubious borrowers, often creating new financial instruments. In other words, more speculative actions take place as people who are fearful of missing out jump in and fuel the latest craze. This stage is often dubbed as “froth” or as Greenspan called it “irrational exuberance.”

For instance, during the dot com bubble of the late 1990s, companies went public in IPOs even before generating earnings or sales. In 2008, it was the securitization of mortgages that led to bigger systemic risks in the housing market.

4. Profit-Taking

This is the stage in which smart investors or those that are insiders sell stocks. This is the “Minsky Moment,” the point before prices in a bubble collapse even as irrational buying continues.

History books say this took place in 1929, just before the stock market crash that led to the Great Depression. In the decade prior known as the “Roaring 20s,” speculators had made outsized risky bets on the stock market. By 1929, some insiders were said to be selling stocks after shoeshine workers started giving stock tips, which they took to be a sign of overextended exuberance.

5. Panic

Panic is the last stage and has historically occurred when monetary tightening or an external shock cause asset values to start to fall. Some firms or companies that borrowed heavily begin to sell their positions, causing greater price dips in markets.

After the Roaring 20s, tech bubble, and housing bubble of the mid-2000s, the stock market experienced steep downturns in each instance — a period in which panic selling among investors ensued.

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The Takeaway

One of the prevailing beliefs in the financial world is that markets are efficient. This means that asset prices have already accounted for all the information available. But market bubbles show that sometimes actors can discount or misread signs that asset values have become inflated. This typically happens after long stretches of time during which prices have marched higher.

Stock market bubbles may occur when there’s the illusion that share prices can only go higher. While bubbles and boom-and-bust cycles are part of markets, investors should understand that stock volatility is usually inevitable in stock investing.

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

FAQ

What is the primary cause of a stock market bubble?

Generally, a stock market bubble is caused by speculative investing and trading, but not always. Increased speculation can cause assets to see their values increase far beyond what might be expected, leading to a bubble.

What are the five stages of a market bubble?

The five stages of a market bubble are displacement, the boom, euphoria, profit-taking, and finally, panic, as the bubble bursts.

Is it easy to recognize a stock market bubble?

While there may be times when an investor believes they see a market bubble forming, they could be wrong. Often, it’s difficult to recognize a market bubble, but it may be important for wary investors to take measures to protect their portfolios as best they can.

Photo credit: iStock/fizkes

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

CRYPTOCURRENCY AND OTHER DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Cryptocurrency and other digital assets are highly speculative, involve significant risk, and may result in the complete loss of value. Cryptocurrency and other digital assets are not deposits, are not insured by the FDIC or SIPC, are not bank guaranteed, and may lose value.

All cryptocurrency transactions, once submitted to the blockchain, are final and irreversible. SoFi is not responsible for any failure or delay in processing a transaction resulting from factors beyond its reasonable control, including blockchain network congestion, protocol or network operations, or incorrect address information. Availability of specific digital assets, features, and services is subject to change and may be limited by applicable law and regulation.

SoFi Crypto products and services are offered by SoFi Bank, N.A., a national bank regulated by the Office of the Comptroller of the Currency. SoFi Bank does not provide investment, tax, or legal advice. Please refer to the SoFi Crypto account agreement for additional terms and conditions.

SOIN-Q325-121

Aug

2025

Inherited 401(k): Rules and Tax Information

By Ashley Kilroy | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

What Is an Inherited 401(k)?
How RMDs Impact Inherited 401(k)s
How to Handle Unclaimed Financial Assets
FAQ

When you inherit a 401(k) retirement account, there are tax rules and other guidelines you must follow in order to make the most of your inheritance.

Inheriting a 401(k) isn’t as simple as an inheritance like cash, property, or jewelry. How you as the beneficiary must handle the account is determined by your relationship to the deceased, your age, and other factors.

Understanding the tax treatment of an inherited traditional 401(k) is especially important because these 401(k) accounts are tax-deferred vehicles. That means regardless of your status as a beneficiary you will owe taxes on the withdrawals from the account, now or later.

Key Points

• Beneficiaries face different rules and tax implications for inherited 401(k) based on their relationship to the account holder.

• Beneficiaries can disclaim, take a lump-sum, or roll over funds into an inherited IRA.

• Spouse beneficiaries can also roll over funds into their own 401(k) or IRA without tax penalties. Non-spouse beneficiaries don’t have this option.

• In general non-spouse beneficiaries must withdraw funds within 10 years, with exceptions.

• Managing required minimum distributions (RMDs) is crucial to avoid penalties and optimize tax efficiency.

What Is an Inherited 401(k)?

The rules for inheriting a 401(k) account are different when you inherit the account from a spouse versus someone who wasn’t your spouse. Depending on your relationship, there are different options for what you can do with the money and how your tax situation will be affected.

A traditional 401(k) is a tax-deferred retirement account, and the beneficiary will owe taxes on any withdrawals from that account, based on their marginal tax rate.

Inheriting a 401(k) From a Spouse

A spouse has a number of options when inheriting a 401(k). These include:

• Roll over the inherited 401(k) into your own 401(k) or into an inherited IRA: For many spouses, taking control of an inherited 401(k) by rolling over the funds is often the preferred choice. For instance, you could open an IRA and roll over the inherited 401(k) into it. A rollover gives the money more time to grow, which could be useful as part of your own retirement strategy. Also, rollovers do not incur penalties or taxes.

However, it’s worth noting that if you convert funds from a traditional 401(k) to a Roth 401(k) or a Roth IRA, you will likely owe taxes on the conversion to a Roth account.

Also, once the rollover is complete, traditional 401(k) or IRA rules apply, meaning you’ll face a 10% penalty for early withdrawals before age 59½.

And when you reach age 73, you must start taking required minimum distributions (RMDs). Because RMD rules have recently changed, owing to the SECURE Act 2.0, it may be wise to consult a financial professional to determine the strategy that’s best for you.

• Take a lump sum distribution: Withdrawing all the money at once will not incur a 10% early withdrawal penalty as long as you’re over 59 ½, but you’ll owe income tax on the money in the year you withdraw it — and the amount you withdraw could move you into a higher tax bracket.

• Reject or disclaim the inherited account: By doing this, you would be passing the account to the next beneficiary.

• Leave the inherited 401(k) where it is (as long as the plan allows this option): If you don’t touch or transfer the inherited 401(k), you are required to take RMDs if you’re at least 73. If you’re not yet 73, other rules apply and you may want to consult a professional.

Inheriting a 401(k) From a Non-Spouse

The options for a non-spouse beneficiary such as a child or sibling are more limited. For example, as a non-spouse beneficiary you cannot roll over an inherited 401(k) into your own retirement account. These are the options you have:

• “Disclaim” or basically reject the inherited account.

• Take a lump-sum distribution. If you are 59 ½ or older, you won’t face the 10% penalty, but you will have to pay taxes on the distribution.

• Roll over the inherited 401(k) into an inherited IRA. This allows you to take distributions based on a specific timeline, as follows:

If the account holder died in 2019 or earlier, one option you have is to take withdrawals for up to five years — as long as the account is empty after the five-year period. This is known as the five-year rule. The other option is to take distributions based on your own life expectancy beginning the end of the year following the account holder’s year of death.

If the account holder died in 2020 or later, you have 10 years to withdraw all the funds. You must start taking withdrawals starting no later than December 31 of the year after the death of the account holder. This rule is known as the 10-year rule.

Note that if you are a non-spouse beneficiary and you’re younger than 59 ½ at the time the withdrawals begin, you won’t face a 10% penalty for early withdrawals.

The exception to the 10-year rule is if you’re a minor child, chronically ill or disabled, or not more than 10 years younger than the deceased, you are considered an eligible designated beneficiary and you can take distributions throughout your life (see more about this below). In that case, you might want to use the distributions to set up a retirement account of your own, such an IRA, in a brokerage account or an online brokerage, for instance.

Tax Implications for Spouses vs. Non-Spouse Beneficiaries

In general, distributions from inherited traditional 401(k)s for both spouse and non-spouse beneficiaries are subject to income tax. That means the beneficiaries pay taxes based on their current tax rate for any withdrawals they make. This is something to keep in mind if you are considering a lump sum distribution. In that case, the taxes could push you into a higher tax bracket.

One option spouse beneficiaries have that non-spouse beneficiaries don’t, is to roll over the 401(k) into their own 401(k) or IRA. Such a rollover will not incur taxes at the time it takes place — the funds are treated as if they were originally yours. With this option, RMDs (and the taxes they entail) don’t need to be taken until you are 73.

How RMDs Impact Inherited 401(k)s

If the account holder died prior to January 1, 2020, beneficiaries can use the so-called “life expectancy method” to withdraw funds from an inherited 401(k). That means taking required minimum distributions, or RMDs, based on your own life expectancy per the IRS Single Life Life Expectancy Table (Publication 590-B).

But if the account holder died after December 31, 2019, the SECURE Act outlines different withdrawal rules for those who are defined as eligible designated beneficiaries.

Calculating RMDs for Inherited 401(k)s

Calculating RMDs is different for spouse beneficiaries and non-spouse beneficiaries. Spouse beneficiaries who roll over the 401(k) into an inherited IRA can take RMDs based on their age and life expectancy factor that’s in the IRS Single Life Expectancy Table.

For non-spouse beneficiaries, if the original 401(k) account holder died before January 1, 2020, and the account holder’s death occurred before they started taking RMDs (called the required beginning date), the beneficiary can take distributions based on their own life expectancy starting at the end of the year following the account holder’s year of death. Or they can follow the five-year rule outlined above.

However, if the account holder’s death occurred after they started taking RMDs, non-spouse beneficiaries can take distributions based on their own life expectancy or the account holder’s remaining life expectancy, whichever is longer.

The scenario changes if the account holder died in 2020 or later because of SECURE 2.0. This is when the withdrawal ranges depend on whether the non-spouse beneficiary is an eligible designated beneficiary or a designated beneficiary. An eligible designated beneficiary can take RMDs based on their own life expectancy or the account holder’s remaining life expectancy, whichever is longer — or they can use the 10-year rule mentioned above. A designated beneficiary, on the other hand, must follow the 10-year rule.

What Is an Eligible Designated Beneficiary?

To be an eligible-designated beneficiary, and be allowed the option to take RMDs based on your own life expectancy, an individual must be one of the following:

• A surviving spouse

• No more than 10 years younger than the original account holder at the time of their death

• Chronically ill

• Disabled

• A minor child

Individuals who are not eligible-designated beneficiaries must withdraw all the funds in the account by December 31st of the 10th year following the year of the account owner’s death.`

Exceptions to the 10-Year Rule for Eligible Designated Beneficiaries

Eligible designated beneficiaries are exempt from the 10-year rule (that is, unless they choose to take it). With the exception of minor children, eligible designated beneficiaries can take distributions over their life expectancy.

Minor children must take any remaining distributions within 10 years after their 18th birthday.

Recommended: Retirement Planning Guide

How to Handle Unclaimed Financial Assets

What if someone dies, leaving a 401(k) or other assets, but without a will or other legally binding document outlining the distribution of those assets?

That money, or the assets in question, may become “unclaimed” after a designated period of time. Unclaimed assets may include money, but can also refer to bank or retirement accounts, property (such as real estate or vehicles), and physical assets such as jewelry.

Unclaimed assets are often turned over to the state where that person lived. However, it is possible for relatives to claim the assets through the appropriate channels. In most cases, it’s incumbent on the claimant to provide supporting evidence for their claim, since the deceased did not leave a will or other documentation officially bequeathing the money to that person.

Tips for Locating and Claiming Unclaimed 401(k) Accounts

Because of the SECURE 2.0 Act, it is now generally easier to track down an unclaimed 401(k). As part of the Act, the Department of Labor set up a lost and found database for workplace retirement plans. To use the database, you’ll first need a Login.gov account. You can set up an account online by supplying your legal name, date of birth, Social Security number, and the front and back of an active driver’s license. You’ll also need a cell phone for verification purposes.

Through the lost and found database for workplace retirement plans, you can search for retirement accounts associated with a person’s Social Security number. Once you find an account, the database will provide contact information for the plan administrators. You can reach out to the administrators to find out more about the account and what you might be eligible to collect.

The Takeaway

Inheriting a 401(k) can be a wonderful and sometimes unexpected financial gift. It’s also a complicated one. For anyone who inherits a 401(k) — spouse or non-spouse — it can be helpful to review the options for what to do with the account, in addition to the rules that come with each choice, as well as consider your financial situation and possibly consult with a financial professional.

In some cases, the beneficiary may have to take required distributions (withdrawals) based on their age. In other cases, those required withdrawals may be waived. But in almost all cases, withdrawals from the inherited 401(k) will be taxed at the beneficiary’s marginal tax rate.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Easily manage your retirement savings with a SoFi IRA.

🛈 While SoFi does not offer 401(k) plans at this time, we do offer a range of individual retirement accounts (IRAs).

FAQ

Can an inherited 401(k) be rolled into an IRA?

Yes, an inherited 401(k) can be rolled over into an IRA. Spouse beneficiaries of a 401(k) can have it directly rolled over into an inherited IRA account in their name. Non-spouse beneficiaries can do the same. However, if the original account holder died after December 31, 2019, the non-spouse beneficiary must withdraw the entire amount in the account within 10 years.

Are there penalties for not taking RMDs from an inherited 401(k)?

There is a 25% penalty for not taking RMDs from an inherited 401(k). However, if the mistake is corrected within two years, the penalty may be reduced to 10%.

How are inherited 401(k) distributions taxed?

For both spouse and non-spouse beneficiaries, distributions from inherited 401(k)s are subject to income tax. This means the beneficiaries pay taxes based on their current tax rate for any distributions or withdrawals they make.

What happens to a 401(k) with no designated beneficiary?

A 401(k) with no designated beneficiary is automatically inherited by the account holder’s spouse upon their death. For those who are unmarried with no designated beneficiary, the 401(k) may become part of their estate and go through probate with their other possessions.

Do non-spouse beneficiaries have to withdraw inherited 401(k) funds within 10 years?

If the 401(k) account holder died in 2020 or later, non-spouse beneficiaries generally have to withdraw all the funds from the inherited 401(k) within 10 years. However, there is an exception for eligible designated beneficiaries (which includes a spouse, a minor child, a beneficiary who is chronically ill or disabled, or a beneficiary who is not more than 10 years younger than the account holder at the time of their death). These eligible designated beneficiaries are exempt from the 10-year rule and can instead take distributions over their lifetime if they choose.

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

SOIN-Q325-041

Aug

2025

Market Capitalization: Definition, What It Tells You, Formula

By Austin Kilham | Growing Wealth, invest, Investing, Terminology | Comments Off

Table of Contents

What Is Market Capitalization?
Market-Cap Categories
How to Calculate Market Cap
Market Cap vs Stock Price
Evaluate Stocks Using Market Cap
What Market Cap Can Tell You
Market Cap and Diversification
What Is Free-Float Market Cap?
Market Cap vs Enterprise Value
FAQ

Market capitalization (market cap) is a basic formula that multiplies a company’s current price per share by the number of outstanding shares to get the total value of its equity.

A company’s market capitalization, or market cap, provides a useful measure of its size and value, versus revenue or sales figures. Knowing what the market cap is for a given company can help investors compare it to other companies of a similar size.

Note that the market cap (the value of a company’s total equity) is different from a company’s market value, which is a more complex calculation based on various metrics, including return-on-equity, price-to-earnings, and more.

Key Points

• Market capitalization (market cap) refers to the total market value of a company’s outstanding shares and provides a measure of its size and value.

• Market cap can be calculated by multiplying the current price per share by the number of outstanding shares.

• Market cap helps investors compare companies of similar size in order to evaluate the potential risk and reward.

• Companies are categorized into small-cap, mid-cap, large-cap, and mega-cap based on their market cap range.

• Smaller companies (nano-cap and micro-cap) can be riskier, but offer growth opportunities, while larger companies (large-cap and mega-cap) tend to be more stable.

What Is Market Capitalization?

A company’s market cap, or market capitalization, is the total dollar value of its outstanding shares. Outstanding shares simply refers to the amount of stock that has been issued by the company and is held by shareholders.

Market-Cap Categories

Analysts, as well as index and exchange-traded fund (ETF) providers, commonly sort stocks into small-, mid-, and large-cap stocks, though some include a broader range that goes from micro- or nano-cap stocks all the way to mega cap on the other end.

Understanding the market capitalization for different stocks and funds can help investors evaluate risk and performance when investing online or through a traditional brokerage.

The size criteria for these categories can change depending on market conditions but here are some basic parameters.

Nano-Cap and Micro-Cap Stocks

Nano- and micro-cap companies are those with a total market capitalization under $300 million. Some define nano-cap stocks as those under $50 million, and micro-cap stocks as those between $50 million and $300 million.

These smaller companies can be riskier than large-cap companies (though not always). Many microcap stocks trade over-the-counter (OTC). Over-the-counter stocks are not traded on a public exchange like the New York Stock Exchange (NYSE) or Nasdaq. Instead, these stocks are traded through a broker-dealer network.

As a result there may be less information available about these companies, which can make them difficult to assess in light of certain risk and performance factors.

Small-Cap Stocks

Small-cap companies are considered to be in the $300 million to $2 billion range. They are generally younger and faster-growing than large-cap stocks. Investors often look to small-caps for growth opportunities.

While small-cap companies have historically outperformed large-caps, these stocks can also be more risky, and may require more due diligence from would-be investors.

Mid-Cap Stocks

Mid-cap companies lie between small- and large-cap companies, with market caps of $2 billion to $10 billion.

When investing in stocks, investors may find mid-cap companies attractive because they can offer some of the growth potential of small-caps with some of the maturity of large-caps.

But mid-cap stocks likewise can share some of the downsides of those two categories, being somewhat vulnerable to competition in some cases, or lacking the impetus to expand in others.

Large-Cap Stocks

Large-cap stocks are those valued between $10 billion and $200 billion, roughly. Large-cap companies tend not to offer the same kind of growth as small- and mid-cap companies. But what they may lack in performance they can deliver in terms of stability.

These are the companies that tend to be more well established, less vulnerable to sudden market shocks (and less likely to collapse). Some investors use large-cap stocks as a hedge against riskier investments.

Mega-Cap Stocks

Mega cap describes the largest publicly traded companies based on their market capitalization. Mega cap stocks typically include industry-leading companies with highly recognizable brands with valuations above $200 billion.

Recommended: Investing 101 Guide

How to Calculate Market Cap

To figure out a company’s market cap, simply multiply the number of outstanding shares by the current price per share. If a company has 10 million outstanding shares of stock selling for $30 per share, the company’s market cap is $300 million.

Share prices fluctuate constantly, and as a result, so does market cap. You should be able to find the number of outstanding shares listed on a company’s balance sheet, where it’s referred to as “capital stock.” Companies update this number on their quarterly filings with the Securities and Exchange Commission (SEC).

Market Cap Formula

The formula for determining a company’s market cap is fairly simple:

Current price per share x Total # of outstanding shares = Market capitalization

Remember that the share price doesn’t determine the size of the company or vice versa. When measuring market cap you always have to look at the share price multiplied by the number of outstanding shares.

• Company A could be worth $100 per share, and have 50,000 shares outstanding, for a total market cap of $5 million.

• Company B could be worth $25 per share, and have 20 million shares outstanding, for a total market cap of $500 million.

Market Cap and Number of Shares

In some cases, market cap can change if the number of stocks increases or decreases. For example, a company may issue new stock or even buy back stock. When a company issues new shares, the stock price may dip as investors worry about dilution.

Stock splits do not increase market share, because the price of the stock is also split proportionally.

Changes to the number of shares are relatively rare, however. More commonly, investors will notice that changes in share price have the most frequent impact on changing market cap.

Market Cap vs Stock Price

While the share price of a company tells you how much it costs to own a piece of the company, it doesn’t really give you any hints as to the size of the company or how much the company is worth.

Market cap, on the other hand, can reveal how a particular stock might behave. For example, large companies may be more stable and experience less volatility than their smaller counterparts.

Recommended: Intrinsic Value vs. Market Value

Evaluate Stocks Using Market Cap

Understanding the market cap of a company can help investors evaluate the company in the context of other companies of similar size.

For instance, market cap can clue investors into stocks’ potential risk and reward, in part because the size of a company can be related to where that company is in its business development.

Investors can also evaluate how a company is doing by comparing its performance to an index that tracks other companies of a similar size, a process known as benchmarking.

• The S&P 500, a common benchmark, is a market-cap weighted index of the 500 largest publicly traded U.S. companies.

• The S&P MidCap 400, for example, is a market-cap weighted index that tracks mid-cap stocks.

• The Russell 2000 is a common benchmark index for small cap stocks.

Within this system, companies with higher market cap make up a greater proportion of the index. You may often hear the S&P 500 used as a proxy for how the stock market is doing on the whole.

What Market Cap Can Tell You

Here are some characteristics of larger market-cap companies versus smaller-cap stocks:

Volatility: Larger companies, some of which are considered blue-chip stocks, tend to be less volatile than smaller stocks, and tend to offer steady returns.

Revenue: Larger stocks tend to have more international exposure when it comes to their sales and revenue streams. Meanwhile, smaller stocks can be more oriented to the domestic economy.

Growth: Smaller companies tend to have better odds of offering faster growth.

Valuation: Larger stocks tend to be more expensive than smaller ones and have higher valuations when it comes to metrics like price-to-earnings ratios.

Dividends: Many investors are also drawn to large cap stocks because companies of this size frequently pay out dividends. When reinvested, these dividends can be a powerful driver of growth inside investor portfolios.

Market Cap and Diversification

So how do you use market cap to help build a portfolio? Market cap can help you choose stocks that could help you diversify your portfolio.

Building a diversified portfolio made up of a broad mix of investments is a strategy that can help mitigate risk.

That’s because different types of investments perform differently over time and depending on market conditions. This idea applies to stock from companies of varying sizes, as well. Depending on market conditions, small-, medium-, and large-cap companies could each beat the market or trail behind.

Because large-cap companies tend to have more international exposure, they might be doing well when the global economy is showing signs of strength. On the flip side, because small-cap companies tend to have greater domestic exposure, they might do well when the U.S. economy is expected to be robust.

Meanwhile, larger-cap companies could also outperform when there’s a downturn, because they may have more cash at hand and prove to be resilient. In recent years, the biggest companies in the U.S. have been linked to technology. Therefore, picking by market cap can have an impact on what kind of sectors are in an investor’s portfolio as well.

What Is Free-Float Market Cap?

Float is the number of outstanding shares that are available for trading by the public. Therefore, free-float market cap is calculating market cap but excluding locked-in shares, typically those held by company executives.

For example, it’s common for companies to provide employees with stock options or restricted stock units as part of their compensation package. These become available to employees according to a vesting schedule. Before vesting, employees typically don’t have access to these shares and can’t sell them on the open market.

The free-float method of calculating market cap excludes shares that are not available on the open market, such as those that were awarded as part of compensation packages. As a result, the free-float calculation can be much smaller than the full market cap calculation.

However, this method could be considered to be a better way to understand market cap because it provides a more accurate representation of the movement of stocks that are currently in play.

Market Cap vs Enterprise Value

While market cap is the total value of shares outstanding, enterprise value includes any debt that the company has. Enterprise value also looks at the whole value of a company, rather than just the equity value.

Here is the formula for enterprise value (EV):

Market cap + market value of debt – cash and equivalents.

A more extended version of EV is here:

Common shares + preferred shares + market value of debt + minority interest – cash and equivalents.

The Takeaway

Market capitalization is a common way that analysts and investors describe the value and size of different companies. Market cap is simply the price per share multiplied by the number of outstanding shares. Given that prices fluctuate constantly, so does the market cap of each company, but the parameters are broad enough that investors can generally gauge a company’s market capitalization in order to factor it into their investing strategy.

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FAQ

What is the maximum market cap?

In theory there is no cap on market cap; i.e., there is no maximum size a company can be. As of Aug. 20, 2025, the top five biggest companies by market cap, according to Motley Fool, are: Nvidia ($4.24 trillion), Microsoft ($3.90 trillion), Apple ($3.02 trillion), Alphabet (Google) ($2.30 trillion), Amazon ($2.28 trillion).

How does market cap go up?

A company’s market cap can grow if the share price goes up.

Are large-cap stocks good?

The market cap of any company is neither good nor bad; it’s simply a way to measure the company’s size and value relative to other companies in the same sector or industry. You can have mega-cap companies that underperform and micro-cap companies that outperform.

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

SOIN-Q325-115

Aug

2025

What Is a Financial Instrument? Types & Asset Classes Explained

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

Table of Contents

What Is a Financial Instrument?
Types of Financial Instruments
Asset Classes of Financial Instruments
Are Commodities Financial Instruments?
Uses of Financial Instruments
Importance of Financial Instruments
FAQ

A financial instrument is simply a contract between entities that represents the exchange of money for a certain asset. Financial instruments include most types of investments: cash, stocks, bonds, mutual funds, exchange-traded funds (ETFs), derivatives, and more.

Financial instruments facilitate the movement of capital through the markets and the broader economic system. While this may take different forms, the flow of capital remains a central feature.

Key Points

• Financial instruments are contracts for exchanging monetary value for assets, crucial for market capital movement.

• Financial instruments can include equities, debt, and more.

• Derivatives, such as options and futures, derive value from underlying assets and are often used for hedging risk or speculation.

• Foreign exchange instruments facilitate currency trading in international markets.

• Financial instruments can help facilitate the flow of capital, helping businesses raise funds, or investors store value.

What Is a Financial Instrument?

Generally Accepted Accounting Principles (GAAP) defines a financial instrument as cash; evidence of an ownership interest in a company or other entity; or a contract. A financial instrument confers either a right or an obligation to the holder of the instrument, and is an asset that can be created, modified, traded, or settled.

Investors can trade financial instruments on a public exchange. The New York Stock Exchange (NYSE) is an example of a spot market in which investors can trade equity instruments for immediate delivery.

Financial Instrument vs Security

A security is a type of financial instrument with a fluctuating monetary value that carries a certain amount of risk for the individual or entity that holds it. Investors can trade securities through a public exchange or over-the-counter market.

The federal government regulates securities and the securities industry under a series of laws, including the Securities Act of 1933, the Securities Exchange Act of 1934, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

All securities are financial instruments but not all financial instruments are securities.

Like financial instruments, securities fall into different groups or categories. The four types of securities include:

• Equities. Equities represent an ownership interest in a company. Stocks and mutual funds are examples of equity securities.

• Debt. Debt refers to money lent by investors to corporate or government entities. Corporate and municipal bonds are two examples of debt securities.

• Derivatives. Derivatives are financial contracts whose value is tied to an underlying asset. Futures, swaps, and stock options are derivative instruments.

• Hybrid. Hybrid securities combine aspects of debt and equity. Convertible bonds are a type of hybrid instrument.

Types of Financial Instruments

Financial instruments are not all alike. There are different types of financial instruments in different asset classes. Certain financial instruments are more complex in nature than others, meaning they may require more knowledge or expertise to handle or trade.

1. Cash Instruments

Cash instruments are financial instruments whose value fluctuates based on changing market conditions. Cash instruments can be securities traded on an exchange, such as stocks, or other types of financial contracts.

For example, a certificate of deposit account (CD) is a type of cash instrument. Loans also fall under the cash instrument heading as they represent an agreement or contract between two parties where money is exchanged.

2. Derivative Instruments

Derivative instruments or derivatives draw their value from an underlying asset, and fluctuate based on the changing value of the underlying security or benchmark.

As mentioned, options are a type of derivative instrument, as are futures contracts, forwards, and swaps.

3. Foreign Exchange Instruments

Foreign exchange instruments are financial instruments associated with international markets. For example, in forex trading investors trade currencies from different currencies through global exchanges.

Asset Classes of Financial Instruments

Financial instruments can also be broken down by asset class.

Debt-Based Financial Instruments

Companies use debt-based financial instruments as a means of raising capital. For example, say a municipal government wants to launch a road improvement project but lacks the funding to do so. They may issue one or more municipal bonds to raise the money they need.

Investors buy these bonds, contributing the capital needed for the road project. The municipal government then pays the investors back their principal at a later date, along with interest.

Equity-Based Financial Instruments

Equity-based financial instruments convey some form of ownership of an entity. If you buy 100 shares of stock in XYZ company, for example, you’re purchasing an equity-based instrument.

Equity-based instruments can help companies raise capital, but the company does not have to pay anything back to investors. Instead, investors may receive dividends from the stock shares they own, or realize profits if they’re able to sell those shares for a capital gain.

Are Commodities Financial Instruments?

Commodities such as oil or gas, precious metals, agricultural products, and other raw materials are not considered financial instruments. A commodity itself, such as pork or copper, doesn’t direct the flow of capital.

That said, there are certain instruments whereby commodities are traded, including stocks, exchange-traded funds, and futures contracts.

A futures contract represents an agreement to buy or sell a certain commodity at a specific price at a future date. So, for example, an orange grower might sell a futures contract agreeing to sell a certain amount of their crop for a set price. An orange juice company could then buy a contract to purchase oranges at X price.

For the everyday investor, futures trading in commodities typically doesn’t mean you plan to take delivery of two tons of coffee beans or 4,000 bushels of corn. Instead, you buy a futures contract with the intention of selling it before it expires.

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

Uses of Financial Instruments

Investors and businesses may use financial instrument for the following purposes:

1. As a Means of Payment

You probably already use financial instruments in your everyday life. When you write a check to pay a bill or use cash to buy groceries, you’re exchanging a financial instrument for goods and services.

Likewise, business entities may charge purchases to a business credit card. They’re borrowing money from the credit card company and paying it back at a later date, often with interest.

2. Risk Transfer

Some investors often use financial instruments to help transfer risk when trading options and other derivative instruments, such as interest rate swaps. With options, for example, an investor has the option to buy or sell an underlying asset at a specified price on or before a predetermined date. A contract exists between the individual who writes the option and the individual who buys it. This type of financial instrument allows an investor to speculate about which way prices for a particular security may move in the future.

3. To Store Value

Businesses often use financial instruments to store value. For example, say you default on a credit card balance. Your credit card company can write off the amount as a bad debt and sell it to a debt collector. Meanwhile, businesses with outstanding invoices they’re awaiting payment on can use factoring or accounts receivables financing to borrow against their value.

4. To Raise Capital

Companies and entities may issue stocks or bonds in order to get access to capital that they can invest in their business or fund a project. In this case, the financial instruments could be a means of raising capital for one party and a store of value for the other.

Importance of Financial Instruments

Financial instruments are central to not only the stock market, but also the financial and economic system as a whole. They provide structures and legal obligations that facilitate the regulated exchange of capital via investing, lending and borrowing, speculation and growth.

In short, financial instruments keep the financial markets moving, and they also help businesses to keep their doors open and allow consumers to manage their finances, plan for the future, and invest with the hope of future gains.

For example, you may also have a savings account that you use to hold your emergency fund, an Individual Retirement Account (IRA) that you use to save for retirement and a taxable brokerage account for trading stocks. Your checking account is one of the basic tools you might use to pay bills or make purchases.

You might be paying down a mortgage or student loans while occasionally using credit cards to spend. All of these financial instruments allow you to direct the flow of money from one place to another.

The Takeaway

Financial instruments are integral to every aspect of the financial world, and they also play a significant part in business transactions and day-to-day financial management. For example, if you trade stocks, invest in an IRA, or write checks to your landlord, then you’re contributing to the movement of capital with various financial instruments.

Understanding the different types of financial instruments is the first step in becoming a steward of your own money.

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

FAQ

What is a financial instrument?

Generally, a financial instrument is cash, evidence of an ownership interest in a company or other entity, or a contract. A financial instrument confers either a right or an obligation to the holder of the instrument, and is an asset that can be created, modified, traded, or settled.

What are financial instruments used for?

Financial instruments can be used to make payments, help transfer risk, store value, or raise capital, among other things.

What are the four types of securities?

The four main types of securities are equities, debt, derivatives, and hybrid securities, with sub-types within each category.

Photo credit: iStock/Love portrait and love the world

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

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

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

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

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

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

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

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

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

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.

SOIN-Q325-109

Cash Account vs Margin Account: Key Differences

What Is a Cash Account?

How Does a Cash Account Work?

Pros and Cons of a Cash Account

Cash Account Regulations to Be Aware Of

Cash Liquidation Violations

Good Faith Violation

Freeriding Violation

A Benefit of a Cash Account: Lending

What Is a Margin Account and How Does It Work?

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Margin Account Requirements

Minimum Margin

Initial Margin

Maintenance Margin

Margin Account vs Cash Account

Similarities Between Margin and Cash Accounts

Differences Between Margin and Cash Accounts

Should You Choose a Margin Account or a Cash Account?

Reasons to Consider a Cash Account

Reasons to Consider a Margin Account

The Takeaway

FAQ

Can you trade options on cash and margin accounts?

Should a beginner use a cash or margin account?

Can you have a cash account and a margin account at the same time?

What Causes a Stock Market Bubble?

What Is a Stock Market Bubble?

The Five Stages of a Market Bubble

1. Displacement

2. Boom

3. Euphoria

4. Profit-Taking

5. Panic

The Takeaway

FAQ

What is the primary cause of a stock market bubble?

What are the five stages of a market bubble?

Is it easy to recognize a stock market bubble?

Inherited 401(k): Rules and Tax Information

What Is an Inherited 401(k)?

Inheriting a 401(k) From a Spouse

Inheriting a 401(k) From a Non-Spouse

Tax Implications for Spouses vs. Non-Spouse Beneficiaries

How RMDs Impact Inherited 401(k)s

Calculating RMDs for Inherited 401(k)s

What Is an Eligible Designated Beneficiary?

Exceptions to the 10-Year Rule for Eligible Designated Beneficiaries

How to Handle Unclaimed Financial Assets

Tips for Locating and Claiming Unclaimed 401(k) Accounts

The Takeaway

FAQ

Can an inherited 401(k) be rolled into an IRA?

Are there penalties for not taking RMDs from an inherited 401(k)?

How are inherited 401(k) distributions taxed?

What happens to a 401(k) with no designated beneficiary?

Do non-spouse beneficiaries have to withdraw inherited 401(k) funds within 10 years?

Market Capitalization: Definition, What It Tells You, Formula

What Is Market Capitalization?

Market-Cap Categories

Nano-Cap and Micro-Cap Stocks

Small-Cap Stocks

Mid-Cap Stocks

Large-Cap Stocks

Mega-Cap Stocks

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How to Calculate Market Cap

Market Cap Formula

Market Cap and Number of Shares

Market Cap vs Stock Price

Evaluate Stocks Using Market Cap

What Market Cap Can Tell You

Market Cap and Diversification

What Is Free-Float Market Cap?

Market Cap vs Enterprise Value

The Takeaway

FAQ

What is the maximum market cap?

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