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Sep

2025

What are the different types of investment fees?

Investment Fees Explained: Definition, Types, Costs

By Colin Dodds | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Are Investment Fees?
Why Are Investment Fees Charged?
Who Charges Investment Fees?
6 Common Types of Investment Fees
Cost of Investment Fees
Pros and Cons of Investment Fees
How Much Is Too High a Price To Invest?
FAQ

No matter what kind of investments an individual makes, they’ll likely face some kind of investing fee. Investment fees are the charges investors pay to use investment products and services, such as management fees, brokerage fees, and commissions.

Over time, fees can make a profound impact on potential returns. That’s why it’s important to understand those fees, and how they may affect your strategy. Here’s a closer look at the types of investment fees investors may come across.

Key Points

• Investment fees, such as management and trading fees, can vary widely, often around 1% for management.

• Many brokerages and investment platforms have gotten rid of commissions for several types of trades in recent years.

• Over time, fees can significantly reduce investment returns, impacting overall gains.

• Broad-index ETFs and mutual funds generally have lower fees compared to specialized funds.

• Hedge funds traditionally charge “2 and 20,: a fee structure that includes a percentage of assets managed, as well as a performance fee.

What Are Investment Fees?

Investment fees are charges investors pay when using financial products, whether they have short vs. long-term investments. Investing fees can include broker fees, trading fees, management fees, and advisory fees.

Broadly speaking, investing fees are structured in two ways: recurring or one-time transaction charges. Recurring is when the charge is a portion of the assets you’ve invested, usually expressed as an annual percentage rate. One-time transaction charges work more like a flat fee, such as a certain number of dollars per-trade.

💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you open an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

Why Are Investment Fees Charged?

Like any purchase you make, there are fees for investment products and services. For instance, a broker will typically charge a fee for buying and selling stocks or managing your portfolio.

While some investing fees and expenses may seem small, over time they can make an impact on your investment and can affect the value of your portfolio. As an investor, it’s important to be aware of these fees and understand exactly what you’re being charged to help make sure you’re getting a good return on investment.

Who Charges Investment Fees?

Financial professionals such as brokers, financial advisors and financial planners usually charge investing fees and expenses. Brokerage firms typically charge fees and commissions. And there are investment fund fees for various financial products, such as mutual fund management fees and fees for operating and administering a 401(k).

6 Common Types of Investment Fees

Generally, there are a handful of different types of investment fees that investors should know about.

1. Management Fees

When it comes to types of investment costs for mutual funds, every mutual fund charges a management fee. And other investment vehicles, such as hedge funds, do as well. This pays the fund’s manager and support staff to select investments and trade them according to the fund’s mandate. In addition to the manager, it also covers the administrative expenses of managing the fund.

This fee is typically assessed as a portion of an investor’s assets, whether the investments do well or not. Some investments, such as hedge funds, charge a performance fee based on the success of the fund, but these are not widely used in most mutual funds.

Management fees vary widely. Some index funds charge as little as 0.10%, while other highly specialized mutual funds may charge more than 2%.

Management fees are expressed as an annual percentage. If you invest $100 in a fund with a 1% management fee, and the fund neither goes up or down, then you will pay $1 per year in management fees.

2. Hedge-fund Fees: Two and Twenty

The classic hedge-fund fee structure is known as “two and twenty” or “2 and 20.” This means that there’s a 2% management fee, so the hedge fund takes 2% of the investor’s assets that are invested. And then there’s a 20% performance fee, so with any profits that are made, the hedge fund takes an additional 20% of those returns.

So let’s say an investor puts $1 million into a hedge fund, and the firm makes a profit of $500,000 in a year. That means the hedge fund would take a management fee of $20,000 plus a performance fee of $100,000 for a total compensation of $120,000.

Bear in mind, investors who are clients at hedge funds are typically institutional investors or accredited investors, those typically with a net worth of at least $1 million, excluding their primary residence. Hedge funds also tend to have higher minimum initial investment amounts, ranging from $100,000 to $2 million, although it varies from firm to firm.

Due to lackluster performance and competition however in recent years, the classic “two and twenty” hedge-fund fee model has become challenged in many years. Many hedge funds now offer rates like “1 and 10” or “1.5 and 15”–a trend dubbed as “fee compression” in the industry.”

3. Expense Ratio

The expense ratio is the percentage of assets subtracted for costs associated with managing the investment. So if the expense ratio is 0.035%, that means investors will pay $3.50 for every $10,000 invested.

The expense ratio includes the management fee, and tells the whole story as to how much of the fund’s assets go toward the people running and selling the fund.

In addition to management fees, a mutual fund may charge other annualized fees. Those can include the fund’s advertising and promotion expense, known as the 12b-1 fee. Those 12b-1 fees are legally capped at 1% annually. But when added to the management fee, it can make a fund more costly than at first glance. That’s one reason to double check the expense ratio.

Another reason is that the expense ratio may actually be lower than the management fee. That’s because some mutual funds will waive a portion of their fees. They may implement a fee waiver to compete for the dollars of fee-wary investors. Or they may do so as a way to hold onto investors after the fund has underperformed.

In the 2010s, some money market funds waived or reimbursed some of their fees after historically low bond yields wiped out any return they offered to investors. While mutual fund companies can reimburse part or all of a fund’s 12b-1 fee, it happens very rarely.

4. Sales Charges

In addition to the annual management and possibly also 12b-1 fees, mutual fund investors may pay sales charges.

Typically, these charges only apply to mutual fund purchases that an investor makes through a financial planner, or an investment advisor. This fee, also called a sales load, is how the advisor gets paid for their service. It isn’t a transaction fee however. Rather it’s a percentage of the assets being invested.

While the maximum legal sales charge for a mutual fund is 8.5%, the common range is between 3% and 6%.

These sales charges can come in different forms. Front-end sales charges come out of an investor’s assets at the time of the sale. Back-end sales charges, on the other hand, are deducted from the investment when the investor chooses to sell. Lastly, contingent deferred sales charges may not come out at all, if the investor stays in the fund for a specified period of time.

5. Advisory Fees

When an investing professional–a financial planner, advisor, or broker–offers advice, this is how they’re paid. Some advisors have a business model where they charge a percentage of invested assets per year. Other advisors, though, charge a transaction fee, in the form of a brokerage commission. Lastly, some simply charge an hourly fee.

Asset-based money management fees are usually expressed as a percentage of the assets invested through them. Typically, a hands-on professional will charge 1% or more per year for their services. That fee is most often deducted from an account on a quarterly basis. And it comes on top of the fees charged by any professionally managed vehicles, such as mutual funds.

But that fee can be much lower for automated investing platforms, also known as “robo-advisors.” Some of these robo-advisors charge annual advisory fees as low as 0.25%. But it’s worth noting that these platforms often rely heavily on mutual funds, which charge their own fees in addition to the platform fees.

Robo-advisors are famous for having rock-bottom fees. However, when investors are comparing robo-advisor fees, they’ll see that there’s a wide range. The minimum balances can also determine what sort of fees investors pay, and there may be additional fees like a potential set-up payment.

Recommended: Are Robo-Advisors Worth It?

6. Brokerage Fees and Commissions

When an investor wants to buy or sell a stock, bond or an exchange traded fund (ETF), they typically use a brokerage firm. Fees and commissions vary widely depending on the type of transaction and the type of broker. Those fees can be based on a percentage of the transaction’s value, or it can be a flat fee, or a combination of the two.

And when investing, that fee depends on whether an investor uses a full-service broker or a discount broker. While a full-service broker can offer a wide range of advice and services, their commissions per trade are far higher than a discount or online brokerage might charge.

Because discount brokers offer less in the way of advice and services, they can charge a lower flat fee per trade. In recent years, the biggest online brokerage firms have offered free trading, partly due to competition and partly because they instead get paid through a practice known as payment for order flow.

Payment for order flow, or PFOF, is the practice of retail brokerage firms sending customer orders to firms known as market makers. In exchange, the brokerage firms receive fees for that order flow.

While widespread and legal, payment for order flow has been controversial because critics say it misaligns the incentives of brokerage firms and their customers. They argue that customers may actually be “paying” for their trades by getting worse prices on their orders. Defenders argue customers get better prices than they would on public exchanges and benefit from zero commissions.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Cost of Investment Fees

The cost of investment fees can vary depending on the type of fee, who is charging it, and the type of account an investor has. For instance, a standard management fee is about 1%.

A broker or brokerage might charge an annual fee of $50 to $75 a year. Not all brokers have an annual fee, so try to find one that doesn’t.

A broker might also charge anywhere from a few dollars to $30 for research. Again, not all brokers levy this charge, so choose a broker that doesn’t charge for research.

In addition, trading platform fees may range from $50 to $200 or more a month. You might also have to pay transfer or closing fees of $50 to $75 to have the brokerage transfer your account elsewhere or close it out.

Pros and Cons of Investment Fees

There are obvious drawbacks of investment fees. The biggest: Investment fees can diminish the returns on your investments. For instance, if your return was 8%, but you paid 1% in fees, your return is actually 7%. Over the years, that difference can be significant.

When it comes to benefits, there may be some advantages to using a fee-only financial advisor over one who charges commissions. For one thing, the costs may be more predictable. A financial advisor may charge a flat fee or charge by the hour. In contrast, a financial advisor who works on commission may suggest financial products that they earn commission from. In addition, many fee-only advisors are fiduciaries, which means they are obligated to act in the client’s best interests at all times.

Each investor should find out the specific fees involved relating to their investment. And don’t be afraid to ask questions. It’s critical to know exactly what you’ll be paying and what those costs cover.

How Much Is Too High a Price To Invest?

The cost of investment fees varies widely, depending on the type of fee. Advisory fees of more than 1% may be considered too high a price for many investors. Sales charges typically range between 3% and 6%, so anything higher than that might be something to avoid.

Of funds that charge fees, broad-index ETFs and mutual funds often charge the lowest fees.

The Takeaway

No matter how an investor gets into the market, they will pay some kind of fee. It may be the quarterly deduction made by a financial advisor, or the trading costs and account fees of an online brokerage account, or the regularly deducted management fees of a mutual fund.

Those fees and commissions add up to the “cost of investment.” That cost is deducted from assets and represents a drag on any return an investor may earn over time. As such, investing fees require close attention, regardless of an investor’s strategy or long-term 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

FAQ

What are typical investment fees?

Typical investment fees include broker fees, trading fees, sales charges, management fees, and advisory fees.

Investment fees tend to be structured either as recurring fees, in which the charges are a percentage of the assets you’ve invested, or as one-time transaction charges that are similar to a flat fee, such as a certain amount of money per-trade.

Is a 1% management fee high?

A 1% management fee is a fairly typical fee. However, even though it is standard, you can try negotiating for a smaller fee than 1%. Some financial advisors may be willing to lower the percentage.

How much should you pay for investment management fees?

Generally, you can expect to pay about 1% for an investment management fee. Overall, percentage fees like this tend to be best for investors with smaller investments, while a flat fee tends to be more advantageous to investors with a very large investment (meaning more than $1 million).

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

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

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

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.

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.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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

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

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

This article is not intended to be legal advice. Please consult an attorney for advice.

SOIN-Q325-124

Sep

2025

Understanding the Different Stock Order Types

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

Table of Contents

Stock Order Types Explained
Trailing Stop-Loss Order
Bracket Order (BO)
Timing Instructions
Which Order Type Is Best?
FAQ

There are several ways to execute stock trades, from the common and relatively simple market order, to more complex stop orders and timing instructions. Each type of order is a tool tailored to specific situations and needs of an investor or trader, and can result in a different outcome.

It’s important to understand the types of order in the stock market thoroughly to know when and how to use them. That way, you’ll be able to know which order will best help you reach your goals as you buy and sell stocks.

Key Points

• Market orders guarantee execution but not price, trading at the current market rate.

• Limit orders specify a price or better for buying or selling, offering more price control.

• Stop orders trigger when a stock reaches a set price, helping to lock in profits or limit losses.

• Stop-limit orders combine stop and limit features, providing execution control at a specific price.

• Timing instructions, such as Day Orders, GTC, IOC, and FOK, modify order duration and execution conditions.

Stock Order Types Explained

Different types of stock orders have different outcomes for investors. The best stock order type for you will depend on your investing style and risk appetite. You’ll need to understand each of them, particularly if you’re working with a self-directed brokerage account.

Here’s a look at the different types of stock orders:

Market Order

A market order is an order to buy or sell a security as soon as possible at its current price. These types of orders make sense when you want to get a transaction done as quickly as possible.

A market order is guaranteed to be carried out, or executed. Investors buying stocks with a market order will pay an amount at or near the “ask” price. Sellers will sell for a price at or near the “bid” price.

However, while you’re guaranteed that your order will execute, you do not get a guarantee on the exact price. In volatile markets, stock prices may move quickly, deviating from the last quoted price, although.

For example, if you put in an order to buy a stock at an ask price of $50 per share, but many other buy orders are executed first, your market order may execute at a higher price as demand rises.

Recommended: What Is a Market-On-Open Order (MOO)?

Limit Order

Limit orders are another common type of stock orders. They are orders to buy or sell stock at a specific price or better within a certain time period. There are two basic types of limit orders:

• Buy limit orders can only be executed at the limit price or lower. For example, say you want to buy shares in a company only when prices hit $40. By placing a limit order for that amount, you can ensure your order only executes when that price, or a lower price, is reached.

• A sell limit order executes when stock hits a certain price or higher. For example, if you don’t want to sell your stock until it hits $40 or more, a sell limit will ensure that you own the stock until it hits that price.

Stop Order

In addition to the more commonly used market orders and limit orders, brokerage firms may also allow investors to use special orders and trading instructions, such as the stop order, also known as a stop-loss order. Stop orders are orders to buy or sell a stock when it reaches a predetermined price, known as the stop price. Stop orders help investors lock in profits and limit losses.

When a stock’s price reaches the stop order price, the stop order becomes a market order. Like a market order, the stop price is not a guaranteed price. Fast moving markets can cause the execution price to be quite different.

Stop-limit Order

Stop-limit orders are a sort of hybrid between stop orders and limit orders. Investors set a stop price, and when a stock hits that price, the stop order becomes limit order, executed at a specific price or better.

Stop-limit orders help investors avoid the risk that a stop order will execute at an unexpected price. That gives them more control over the price at which they’ll buy or sell.

For example, say you want to buy a stock currently priced at $100 but only if it shows signs that it’s on a clear upward trajectory. You could place a stop-limit order with a stop price of $110 and a limit of $115. When the stock reaches $110, the stop order becomes a limit order, and it will only execute when prices reach $115 or higher.

💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.

Trailing Stop-Loss Order

Investors who already own stocks and want to lock in gains may use these relatively uncommon orders. While stop-loss orders help investors buy or sell when a stock hits a certain stop price, trailing stop-loss orders put guardrails around an investment.

For example, if you buy a stock at $100 per share, you might put a trailing stop loss order of 10% on the stock. That way, if, at any time, the stock’s share price dips below 10%, the brokerage will execute the order to sell.

Bracket Order (BO)

Bracket orders are similar to stop-loss orders in that they’re designed to help investors or traders lock in their profits or gains. They effectively create an order “bracket” with two orders: A buy order with a high-side sell limit, and a sell order with a low-side limit.

With a bracket order set up and in place, an order will execute when a security’s value goes outside of the predetermined range, either too high or too low.

Timing Instructions

Investors use a set of tools, known as timing instructions (or time in force instructions), to modify the market orders and limit orders and tailor them to more specific needs.

Day Orders

If an investor does not specify when an order will expire, the brokerage enters it as a day order. At the end of the trading day, it expires. If at that point, the brokerage has not executed the trade, it will have to be reentered the following day.

Market-on-Open (MOO) and Market-on-Close Orders (MOC)

Investors can request to buy or sell shares when the market opens at 9:30am ET, called market-on-open orders. MOO orders must typically be entered two or more minutes prior to the market opening, and can’t be changed or canceled after that point.

A market-on-close order is a request to buy or sell shares near the market’s end-of-day (4pm ET) price, though the price cannot be guaranteed. Nasdaq and NYSE set their own time limits for entering MOCs, each a few minutes before closing.

Good ‘Til Canceled (GTC)

A GTC order allows investors to put a time restriction on an order so that it lasts until the completion or cancellation of an order. Brokerage firms typically place a time limit on how long a GTC order can remain open.

Immediate or Cancel (IOC)

IOC orders allow investors to ask that the brokerage execute the buying or selling of stock immediately. It also allows for partial execution of the order. So, if an investor wants to buy 1,000 shares of a company but it’s only possible to buy 500 shares immediately, these instructions will alert the broker to buy the shares available. If the broker can not fulfill the order, or any portion of the order, immediately, the broker will cancel it.

Fill-Or-Kill (FOK)

Unlike IOC orders, fill-or-kill orders do not permit partial execution. The brokerage must execute the order immediately and in its entirety, or cancel it.

All-Or-None (AON)

Similar to FOKs, all-or-none orders require the complete execution of the order. However, AONs do not require immediate execution, rather the order remains active until the broker executes or cancels it.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Which Order Type Is Best?

The type of order or special instructions you use when buying and selling stock depends on your goals with the transaction. Most beginner investors probably only need to execute market orders and perhaps limit orders.

Those trying to execute more complicated trades in shorter time frames, such as professional traders, may be more likely to use stop orders and special timing instructions.

The Takeaway

There are numerous types of stock orders, including limit orders, stop orders, bracket orders, and more. Investors and traders can use each individually or in concert to execute their strategy, though beginner investors likely won’t dig too far into their order tool kit when learning to navigate the markets.

Before using any of trade orders or timing instructions it’s critical to understand their function and to think carefully about how and whether they apply to your specific needs. Using the right order for your situation can potentially help you reduce risk and protect your portfolio, no matter how many stocks you own.

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 safest type of stock order to use?

The stock order type that is all but guaranteed to execute per an investor’s desires is a market order, which executes immediately and at a given price. Other order types depend on specific conditions dictated by the investor and the market.

What is the difference between stop-loss vs stop-limit orders?

The main difference between a stop-loss order and a stop-limit order is that a stop-loss order guarantees to execute a market order if the stock hits the stop price, while a stop-limit order triggers a limit order when the assigned value is reached.

What is a standard stop-loss rule?

An example of a more or less standard stop-loss rule would be setting the stop-loss order parameters at 2% of the buy price, which would mean that an investor is not putting more than 2% of their initial investment at risk.

Photo credit: iStock/Alina Vasylieva

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

SOIN-Q325-112

Sep

2025

Comparing Stock Warrants vs Options

By Rebecca Lake | 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 Are Stock Warrants?
What Are Options?
Similarities and Differences Between Warrants and Options
Pros and Cons of Warrants
Pros and Cons of Options
FAQ

Stock warrants give the holder the right to buy or sell shares of stock at a set price on or by a set date directly from the public company that issues them, whereas stock options convey the right to buy or sell shares on or before a specific date at a specific price.

The chief difference between stock warrants and stock options is that warrants are issued directly by a company that’s typically seeking to raise capital. Options are derivative contracts that investors can trade to take advantage of price fluctuations in the underlying security.

Key Points

• Stock warrants allow investors to buy shares at a specified price on a set date, directly from the issuing company, while stock options are derivative contracts traded among investors.

• Companies typically issue stock warrants to raise capital, whereas stock options are created and traded by investors, which may allow for more flexibility in trading.

• Exercising a warrant results in the issuance of new shares, which can lead to dilution, while exercising options does not typically create new shares and is settled between traders.

• Both stock warrants and options provide speculative opportunities, but differ in terms of issuance, market trading, and potential dilution effects.

• Understanding the differences between stock warrants and options is important for investors, as each serves distinct purposes and carries unique risks and potential benefits.

What Are Stock Warrants?

A stock warrant is a contract that allows the holder the right to buy shares of stock at a future date at a predetermined price. The terms of the stock warrant typically allow the holder to purchase shares at a price that is often set above the stock’s price at the time of issue. Warrants generally have longer expiration periods than standard options, often lasting up to 10 years or more.

Companies issue stock warrants directly to investors. The companies set the terms of the warrant, including the stock’s purchase price and the final date by which the investor can exercise the warrant. Warrant holders do not have an obligation to buy the shares, but if they decide to do so they would exercise the warrants via their brokerage account.

Stock warrants are typically call warrants, which give the holder the right to purchase the shares at the predetermined price, as noted above. However, there are also put warrants, which give holders the right to sell shares at a predetermined date by the expiration date.

Public companies may issue stock warrants as a means of raising capital to fund new expansion projects. A company may also issue stock warrants to investors if it faces financial trouble and needs to raise funds to potentially avoid a bankruptcy filing.

In some cases, warrants are issued by financial institutions rather than the company itself. These are called “covered warrants” and may be cash-settled, meaning they do not result in new shares or dilution of existing shares.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

What Are Options?

An option is a contract that gives holders the right, but not the obligation, to buy (in the case of a call option or sell, in the case of a put option, an underlying security on or before a specified date at a specified price. As with stock warrants, option holders do not have to buy or sell the underlying shares, but they have the right to do so. If they do, they would exercise the options through their brokerage account.

Exercising options means you use your right to buy or sell the option’s underlying shares. If an investor chooses not to exercise the option, it expires worthless. (Note that the seller, or writer, of an options contract is obligated to fulfill the terms of the contract if it’s exercised.) Investors can trade some options on a public exchange alongside stocks and other securities.

Recommended: How to Trade Options: An In-Depth Guide

Similarities and Differences Between Warrants and Options

Warrants and options sound alike and at first glance, they seem to imply the same thing: the right to buy or sell shares of a particular stock. But there are also important differences between these two contracts that investors should be aware of.

Similarities

Warrants and options both offer investors an opportunity to benefit from movements in a stock’s price, though options can be traded without exercising while warrants typically require exercising to acquire shares.

With both warrants and options, the investor must exercise the contract to actually acquire shares. Both have specific guidelines with regard to the price at which investors can purchase (or sell, in the case of puts) their shares and the deadline for exercising them.

Warrants and options are both speculative in nature, since investors are essentially making a directional bet on which way the underlying asset’s price may move. Neither instrument provides voting rights or dividend payments prior to exercise. Investors can use different strategies when trading options or exercising warrants to potentially improve profitability while attempting to reduce losses.

Differences

Warrants and options also have important differences. While companies issue stock warrants, traders typically buy and sell options with each other directly. Warrants create new shares when exercised, which can result in dilution. Exchange-traded stock options generally do not create new shares, aside from employee stock options, which are basically a type of call option that, when exercised, can also dilute existing shares by increasing the total amount.

When investors exercise a warrant, they receive the stock directly from the company, while options are typically settled between traders.

💡 Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.

Stock Warrants vs Options: A Summary

Here’s a closer look at options vs. warrants.

Stock Warrants	Stock Options
Confers the right to purchase (or sell) shares of stock at a specified price on or before a specified date. Holders of the contract have the right, but not the obligation, to exercise the contract.	Confers the right to buy (or sell) shares of stock at a specified price on or before a specified date. Holders of the contract have the right, but not the obligation, to exercise the contract.
Warrants create new shares, which may result in dilution.	Options do not create new shares, so there’s no dilution (unless they are employee stock options).
Issued by the company directly to investors.	Issued by traders or market makers who write call or put options.
Original issue warrants are not listed on exchanges, but there is a secondary market for the securities.	Options can be traded on public exchanges alongside other securities.
Primarily used to raise capital for the company.	Traders can buy (or write) options to try to benefit from price movements.
Warrant holders may have a decade or more in which to exercise their right to buy shares.	Options tend to be shorter-term in nature, with expiration periods usually lasting anywhere from a few days up to 18 months.
Less commonly used in the U.S.	Options are regularly traded on public exchanges in the U.S.

Pros and Cons of Warrants

If you’re considering warrants versus options, it’s helpful to understand the advantages and disadvantages of each.

Stock warrants can offer both advantages and disadvantages to investors. Whether or not it makes sense to include stock warrants in a portfolio can depend on your individual goals, time horizon for investing and risk tolerance. Warrants are also considered geared instruments, meaning small moves in the underlying stock can produce amplified gains or losses. This leverage may increase risk.

Stock Warrant Pros	Stock Warrant Cons
Warrant holders have the right to purchase (or sell) shares of stock, but are not required to do so.	Price volatility can diminish the value of stock warrants over time.
Stocks may be offered to investors at a premium relative to the current market price.	When warrants are exercised, new shares are issued, which may result in dilution.

Pros and Cons of Options

As with stock warrants, trading options has both upsides and potential downsides. Beginning traders should have a thorough grasp of the essentials, prior to trading, to understand the complexities and risks involved. Here are some of the key points to know about trading options.

Stock Option Pros	Stock Option Cons
Options may amplify gains compared to trading in individual shares of stock.	Stock options are more sensitive to volatility which can mean higher risk for investors.
May be suited to active day traders who are hoping to capitalize on short-term price movements.	Frequent options trades can mean paying more in commissions, detracting from overall returns.
Traders can use options as a hedging tool to manage risk in uncertain market environments.	Time value decays the value of options over time.

The Takeaway

Understanding the difference between options and warrants matters if you’re considering either of these types of securities. While the language of stock warrants may sound similar to some of the terms used in options trading, these are in fact two different instruments.

Companies issue stock warrants primarily to raise capital, whereas traders typically buy and sell options with each other directly. Warrants create new shares of companies, while options do not typically cause any dilution.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

Explore SoFi’s user-friendly options trading platform.

FAQ

Is a warrant the same thing as an option?

No. Warrants and options are not the same thing. Companies issue stock warrants to give investors the right to buy shares of stock at a specified price on a specified date. Stock warrants may allow investors to purchase shares of stock at a premium, while providing a longer window in which to decide whether to exercise the warrant.

Options are derivatives contracts that give buyers the right, but not the obligation to buy (in the case of a call) or sell (in the case of a put) an asset at a specific price within a certain period of time.

Can warrants exist in a SPAC?

Yes. A Special Purpose Acquisition Company (SPAC) is typically created for the purpose of acquiring or merging with an existing company. This type of arrangement may enable private companies to circumvent the traditional IPO process. A SPAC may use warrants to raise capital from investors. These warrants are generally good for up to five years following the completion of a merger or acquisition.

Why would you buy stock warrants?

Stock warrants may appeal to some investors seeking speculative exposure at a lower upfront cost than purchasing shares outright. Warrants offer the right, but not the obligation, to buy stock at a set price in the future, and this can be attractive if the stock’s price rises. Warrants may expire worthless if the share price does not exceed the strike price, however. They are generally considered higher-risk instruments and are not commonly used in traditional portfolios.

Can I sell my stock warrants?

Some stock warrants are transferable, and may be sold on a secondary market. This depends on the issuing company and the terms of the warrant terms. Liquidity can vary: while exchange-listed warrants may be easier to sell, others may have limited or no market activity. It’s important to check the specific warrant agreement to understand whether the security is tradable and what restrictions might apply.

About the author

Rebecca Lake

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

Photo credit: iStock/Inside Creative House

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

SOIN-Q325-016

Sep

2025

What Are Power Hour Stocks? What to Know When Trading

Power Hour Stocks: What Are They and How Do You Trade Them?

By Brian O'Connell | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is the Stock Market Power Hour?
When Does Stock Power Hour Occur?
Red Flags and Triggers to Look for During Power Hour Trading
FAQ

The power hour is a period of active trading, high volume, and volatility that tends to occur when the market opens and again when it closes. Many short-term traders find the power hour appealing because of the trading opportunities it presents.

Power hour trading generally isn’t as compelling to buy-and-hold and longer-term investors, as these short-term trades come with much higher risk exposure, despite the opportunity for gains.

Key Points

• The “power hour” refers to periods of high trading activity, volume, and volatility typically at the market’s open and close.

• While appealing to short-term traders, power hour trading carries more risk for longer-term investors.

• The first hour of trading is active due to reactions to overnight news, while the last hour sees increased activity as traders look to close positions or capitalize on heightened selling.

• Triggers for intense power hour trading include earnings reports, news about “daily gainers,” major economic news, and quarterly triple witching hour events.

• Due to increased volatility and risk, it is advisable for investors unfamiliar with choppy markets to avoid power hour trading.

What Is the Stock Market Power Hour?

During the trading day, the power hour is when traders have a concentrated time to leverage specific market opportunities. That goes for anyone trading common market securities like stocks, index funds, commodities, currencies, and derivatives, especially options trading and futures.

The power hour period typically occurs when the market opens at 9:30am ET and lasts until approximately 10:30am. Some traders identify a second power hour at the end of the day: roughly 3:30pm to 4:30pm, when the market closes.

The heightened activity during these periods comes from a confluence of factors.

• Traders digest recent news and upcoming events.

• They place new trades and look for opportunities.

• The combined activity can create short-term price volatility that some traders can take advantage of.

When Does Stock Power Hour Occur?

The term power hour is subjective, but most market observers land on two specific times in defining the term:

• The first trading hour of the market day. This is when news flows in overnight from across the world that can impact portfolio positions that investors may want to leverage, when investing online or using a brokerage.

• The last hour of the trading day. This is when sellers may be anxious to close a position for the day, and buyers trading stocks may be in a position to pounce and buy low when selling activity is high.

One commonality between the first hour of a stock market trading session and the last hour is that trading volatility tends to be higher than it is during the middle of a normal trading day. That’s primarily because traders are looking to buy or sell when demand for trading is robust, and that usually happens at or near the market opening or the market close.

Each power hour brings something different to the table, when it comes to potential investing opportunities.

Recommended: Stock Trading Basics

Power Hour Start of Day

The first hour of any trading session tends to be the most active, as traders react to overnight news and data numbers and stake out advantageous positions.

For example, an investor may have watched financial or business news the previous night, and is now reacting to a story, interview, or prediction.

Some traders refer to this scenario as “stupid money” trading, as conventional wisdom holds that one news event or headline shouldn’t sway an investor from a strategy-guided long-term investment position. The fact is, by the time the average investor reacts to overnight data, it’s likely the chance for profit is already gone.

Here’s why: Most professional day traders were likely already aware of the news, and have already priced that information into their portfolios. As the price goes up on a stock based on artificial demand, the professional traders typically step in and take the other side of the trade, knowing that in the long run, investing money will drift back to the original trade price for the stock and the professional investor will likely end up making money.

Power Hour End of Day

The last hour of the trading day may also come with high market volatility, which tends to generate more stock trading. Many professional traders tend to trade actively in the morning session and step back during mid-day trading, when volatility is lower and the market is quieter than in the first and last hours of the day.

Regular traders can perk up at the last hour of trading, where trading is typically more frequent and the size of trades generally climb as more buyers and sellers engage before the trading session closes out. Just as in the first hour of the trading day, amateur investors tend to wade into the markets, buying and selling on the day’s news.

That activity can attract bigger, more seasoned traders who may be looking to take advantage of ill-considered positions by average investors, which increases market trading toward the close.

Recommended: 7 Day Trading Strategies for Beginners

Red Flags and Triggers to Look for During Power Hour Trading

For any investor looking to gain an advantage during power hour trading, the idea is to look for specific market news that can spike market activity and heighten the chances of making a profit in the stock market.

These “triggers” may signal an imminent power hour market period, when trading can grow more volatile.

Any Earnings Report

Publicly-traded companies are obligated to release company earnings on a quarterly basis. When larger companies release earnings, the news has a tendency to move the financial markets. Depending on whether the earnings news comes in the morning or after hours, investors can typically expect higher trading to follow. That could lead to heavier power hour trading.

News on Big “Daily Gainers”

Stock market trading activity can grow more intense when specific economic or company news pushes a single large stock — or stock sector — into volatile trading territory.

For instance, if a technology company X announces a new product release, investors may want to pounce and buy that tech stock, hoping for a significant share price uptick. That can lead to higher volume trading stock X, making the company and the market more volatile (especially later in the day), thus ensuring an active power hour trading time.

Reserve/Economic News

Major economic news, like jobs reports, consumer sentiment, inflation rates, and gross domestic product (GDP) reports, are released in the morning. Big news from the Federal Reserve typically comes later in the day, after a key speech by a Fed officer or news of an interest rate move after a Fed Open Markets Committee meeting.

Make no mistake, news on both fronts can be big market movers, and can lead to even more powerful power hour trading sessions.

Anticipation of huge economic news, like a Federal Reserve interest rate hike or the release of the U.S. government’s monthly non-farm labor report, can move markets before the actual news is released, potentially fueling an even larger trading surge after the news is released, either at the open (for government economic news) or at the end of the trading day (for Federal Reserve news).

Triple Witching Hour Events

Quarterly triple witching hours — when stock options, futures and index contracts expire on four separate Fridays during the year — historically have had a substantial impact on market activity on those Friday afternoons, in advance of the contracts expiring at the days’ end.

When options contracts involving larger companies expire, market activity on a Friday afternoon prior to closing can be especially volatile. Thus, any late afternoon power hour on a triple-witching-hour Friday can be highly active, and may be one of the largest drivers of power hour trading during the year.

The Takeaway

The concept of a stock market “power hour” is based on the increased activity at certain times of day — typically the market’s open and close. While the power hour presents opportunities for some traders, others may find it risky.

Consequently, it’s a good idea to give power hours a wide berth if you’re not familiar with trading in choppy markets, where the risk of losing money is high when power trading activity is at its highest.

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

FAQ

Is the power hour a good time to trade?

For sophisticated short-term traders, trading power hour stocks can be advantageous. The heightened market activity often presents a number of opportunities. For those less skilled at maximizing these short windows of opportunity, power hour trading can be highly risky.

Is the power hour more volatile?

Yes, the hallmark of the power hour, whether at the market’s open or close, is its volatility. In short, the power hour is a high-risk time in the market for most ordinary investors.

Can you make money during the power hour?

It’s possible to make money during the power hour, assuming you have the skill and the strategies to seize the opportunities presented by short-term price movements.

Photo credit: iStock/Tatiana Sviridova

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

SOIN-Q325-089

Sep

2025

Do You Need a Long-Term Savings Account?

By Kelly Boyer Sagert | Budgeting & Goals, Financial Independence, money | Comments Off

Saving money is the first step toward achieving your financial goals. But not all savings goals are created equal. Some goals are short-term, like setting aside money for holiday gifts, while others may stretch years into the future, such as buying a home, paying for a wedding, or preparing for retirement. When your savings goals extend beyond a year or two, you may want to consider a long-term savings account.

But what exactly makes a savings account “long-term”? And with so many options — high-yield savings, certificates of deposit, money market accounts, or retirement-specific vehicles — which type is best for your situation?

Below, we’ll explore the essentials of long-term savings accounts, when to use them, and how they can help you reach your biggest financial milestones.

Key Points

• Long-term savings accounts are designed for goals that are at least a couple of years away.

• High-yield savings accounts, certificates of deposit, money market accounts, and retirement accounts can be good options.

• High-yield savings accounts offer higher-than-average interest rates and easy access.

• Certificates of deposit provide fixed, competitive rates but penalize early withdrawals.

• Retirement accounts offer tax advantages and long-term growth.

What Makes a Savings Account “Long-Term”?

In simple terms, a savings account becomes “long-term” when the money is meant to stay untouched for several years, and often much longer. Short-term savings, like an emergency fund or paying for an upcoming vacation, are designed for relatively quick use. Long-term savings, on the other hand, are earmarked for goals that might be a few years — or even decades — away.

While long-term savings accounts generally offer lower returns than investment accounts, they provide security, predictability, and liquidity. These three factors are especially important when you know you’ll need the money at a specific point in the future.

4 Best Types of Long-Term Savings Accounts

There is no single savings account that works for every saver. Instead, the best long-term savings option will depend on your timeline, your need for access to the funds, and how much you want to prioritize growth. Here are four types of accounts (including one investment account) that can help you reach your long-term savings goals.

1. High-Yield Savings Accounts (HYSAs)

A high-yield savings account is a type of savings account that offers a significantly higher interest rate, or annual percentage yield (APY), than a traditional savings account. These accounts are typically offered by online banks, which tend to have lower overhead costs than brick-and-mortar institutions and can pass that savings on to customers in the form of higher rates and lower (or no) fees.

HYSAs are usually insured by the Federal Deposit Insurance Corporation (FDIC), which means your deposits are covered up to $250,000 per depositor, per insured bank, for each account ownership category, even if the bank were to fail.

In addition to safety, HYSAs also offer easy access to your funds via debit card or transferring money online. That accessibility can make them a good fit for people who want to earn meaningful interest but still keep the option of withdrawing their money if a goal comes up sooner than expected.

If you’re saving for a home purchase, a new car, or a major renovation within the next few years, you may find an HYSA particularly useful. An HYSA is also a good place to stash your emergency fund (more on that below).

Recommended: Savings Goal Calculator

2. Certificates of Deposit (CDs)

Available at banks, credit unions, and brokerage firms, certificates of deposit are time-locked accounts where you agree to keep your money deposited for a set term — often ranging from six months to five years — in exchange for a fixed interest rate.

Rates on CDs are not only guaranteed but are generally higher than what you could earn in a traditional savings account. CDs are also typically insured by the FDIC or National Credit Union Administration (NCUA), which insures deposits at credit unions.

This type of long-term savings account can be ideal for savers with a clear timeline. For example, if you know you’ll need the money in three years for a down payment, a CD of the same length can help you protect your funds while also ensuring steady growth.

3. Money Market Accounts

A money market account (MMA) is an interest-bearing deposit account offered by banks and credit unions that blends features of both savings and checking accounts. MMAs typically offer higher rates than standard savings accounts, along with some of the conveniences of a checking account, such as checks and a debit card.

Similar to other types of savings accounts, MMAs are usually FDIC- or NCUA-insured. However, they often require higher minimum balances and may charge fees if you don’t meet monthly balance requirements.

An MMA can be a flexible option for long-term savers who want to earn more than the average savings rate but still want to access their funds occasionally. You might consider an MMA for an emergency fund, saving for a large purchase (like a car or wedding), or holding funds for future investments.

4. Retirement Accounts

Retirement-specific accounts — such as 401(k)s, Individual Retirement Accounts (IRAs), or Roth IRAs — are technically investment vehicles but are crucial for long-term savings. These accounts are designed specifically for retirement and offer unique tax advantages.

These accounts also allow savers with decades-long time horizons to benefit from compounding returns (which is when your returns start earning returns of their own) and, in some cases, employer contributions.

Because they are tied to investments like stocks and bonds, retirement accounts do carry risk, meaning balances can fluctuate in the short term. However, the long time frame can help smooth out those fluctuations. Plus, the tax benefits can make them hard to beat for anyone focused on retirement. Their tradeoff is limited liquidity, since withdrawing money early often results in penalties.

When to Use a Savings Account for Long-Term Goals vs an Investment Account

One of the biggest questions savers face is whether to use a savings account or an investment account for long-term goals. The answer largely depends on your exact timeline and tolerance for risk

Generally speaking, you want to use a savings account when:

• You’ll need the money within the next one to five years.

• You can’t afford to risk losing your principal.

• Your goal has a fixed date, such as a wedding or tuition payment.

Consider using an investment account when:

• Your goal is more than five years away.

• You’re comfortable with short-term market fluctuations in exchange for the chance for higher long-term growth.

• You’re saving for retirement or other distant financial milestones.

In short, savings accounts are about security and liquidity, while investment accounts are about growth and long-term wealth building.

Examples of Long-Term Savings Goals

What might you use a long-term savings account for? Here are three common examples.

Saving for a Down Payment on a House

Buying a home is one of the largest financial milestones most people will face. If you plan to buy in the next few years, keeping your down payment in a HYSA, CD, or MMA ensures your money is safe and growing without the risk of market downturns derailing your purchase plans.

Building a Fund for a Future Large Purchase (Like a Car or Wedding)

Whether you’re planning a dream wedding or upgrading your vehicle, large expenses require careful planning. By using a dedicated savings account — such as a money market or HYSA — you can separate these funds from your everyday spending while earning competitive interest.

Creating a Sabbatical or “Freedom Fund”

More people are saving for lifestyle choices, such as taking time off work to travel, study, or recharge. A sabbatical or “freedom fund” can provide peace of mind and flexibility. Keeping these funds in a long-term savings account like a HYSA, CD, or MMA, ensures they’ll be available when the time is right.

When to Consider an Emergency Savings Account

While long-term savings is essential for reaching your future goals, it’s equally important to have a separate emergency savings account.

This account provides a cushion for unexpected events, such as losing a job, facing a sudden illness, or needing to pay for urgent car or home repairs. Knowing you have funds available for emergencies can ease financial anxiety during a crisis. It also prevents the need to rely on high-interest credit cards or loans to cover surprise costs.

Experts generally advise setting aside at least three to six months’ worth of living expenses in a separate savings account earmarked for emergencies.

Emergency funds are generally best stored in HYSAs or money market accounts, where the money is accessible but still earning above-average interest. Having this safety net allows your long-term savings to stay intact, even when life throws an expensive curveball.

How to Use a Savings Account to Organize Your Long-Term Savings

Managing multiple goals can get tricky, but today’s digital banking tools make it easier. Many banks and credit unions allow you to:

• Open multiple accounts or create customized sub-accounts and label each fund (e.g., “House Fund,” “Wedding Fund”).

• Automate transfers so savings happen consistently without effort.

• Track your progress toward each goal with visual dashboards.

By assigning each goal its own dedicated account or sub-account, you reduce the temptation to borrow from one savings pot to pay for a different goal or expense. It also makes it easy to track your progress, since you can see exactly how close you are to reaching each milestone.

The Takeaway

Long-term savings accounts are powerful tools for turning your future plans into reality. Whether you choose a high-yield savings account for flexibility, a CD for guaranteed returns, a money market account for occasional access, or a retirement account for decades-long growth, the right choice depends on your goals and time frame.

The best long-term savings account is ultimately the one that supports your unique plans, provides the right balance of safety and growth, and makes it easy for you to stay disciplined until you achieve the milestones that matter the most.

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

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

FAQ

What type of account is best for long-term savings?

The best account for long-term savings depends on your goals and risk tolerance. For safe, predictable growth, high-yield savings accounts, certificates of deposit (CDs), or money market accounts are good options. If you want higher returns and can tolerate risk, retirement accounts like IRAs or 401(k)s and investment accounts may be better. Many people use a mix: savings accounts for stability and investment accounts for growth. Diversifying helps ensure your money grows while remaining accessible for future needs.

What is a long-term savings account called?

A long-term savings account doesn’t have a single universal name — it depends on the purpose and institution. Common options include certificates of deposit (CDs), individual retirement accounts (IRAs), 401(k)s, or investment accounts. These accounts are designed for goals like retirement, buying a home, or funding education. High-yield savings accounts and money market accounts can also serve mid- to long-term goals, especially if you want to maintain access to your funds.

What is considered long-term savings?

Long-term savings generally refers to money set aside for goals that are several years or even decades away, such as buying a house, funding a child’s education, or retirement. Unlike emergency funds or short-term savings, which cover immediate or near-future needs, long-term savings are designed to grow over time through interest, dividends, or investment returns. These savings often benefit from compound growth, which is when the returns you earn also earn returns, which can help your money grow faster.

How much should I have in my long-term savings account?

The amount you should have in long-term savings depends on your financial goals, age, and income. A common benchmark for retirement savings is to aim to save at least 15% of your pre-tax income each year, including any employer match. By age 30, some experts suggest having one year’s salary saved, increasing to three times by age 40, and six times by age 50. However, smaller long-term saving goals, like a down payment on a house, will require less.

What kind of savings account makes the most money?

If you’re strictly looking at savings accounts, high-yield savings accounts and certificates of deposit (CDs) typically earn the most interest. However, if your goal is maximizing long-term growth, investment-based accounts — such as brokerage accounts, individual retirement accounts (IRAs), or 401(k)s — generally offer much higher returns over time, though with more risk. Money market accounts can also pay higher rates than standard savings. The best choice depends on your timeframe, risk tolerance, and need for liquidity.

Photo credit: iStock/AndreyPopov

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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