Jun
22
2023
What is a Charitable Gift Annuity and How Does it Work?

What Is a Charitable Gift Annuity and How Does it Work?

By | Growing Wealth, invest, Investing | Comments Off on What Is a Charitable Gift Annuity and How Does it Work?

Funding your retirement is crucial—and donating money to worthy causes is a pretty great financial goal, too. When used correctly, a charitable gift annuity can help you accomplish both of those objectives at the same time.

What Is a Charitable Gift Annuity?

A charitable gift annuity allows a donor to make a contribution to a charity in exchange for a fixed monthly income for both the donor and an optional additional beneficiary later in life. This stream of payments can be a steady source of income in retirement, and is guaranteed through the annuity until all listed beneficiaries die.

However, there are important tax considerations to think through before purchasing a charitable gift annuity—or any annuity, for that matter. In this article, we’ll dive into the details on how charitable annuities work, what makes them different from other kinds of annuities, and how to determine whether or not one is right for you.

Understanding the Concept of Annuities

To fully understand charitable gift annuities, it’s important to have a background on annuities in general.

An annuity is a type of financial product used to create an income stream during retirement. It’s a contract—generally between the beneficiary and an insurance company or bank—that guarantees the buyer a set monthly payment in exchange for money the buyer pays in ahead of time.

Recommended: What is an Annuity, Exactly?

Depending on the type of annuity, the beneficiary might pay for it over time or in a lump sum. Sometimes, payments into the annuity can be made directly from an existing retirement account like an IRA or 401(k). Then, the annuity provider invests the money and makes payments back to the buyer once the retirement period starts. Payments might last for a set amount of time, like 10 years, or for the rest of the beneficiary’s life.

For the provider, an annuity is basically a wager against the buyer’s life expectancy. If the buyer passes away before the retirement savings they’ve paid into the annuity—along with any interest it’s earned in the meantime—has been paid back to them entirely, the annuity provider gets to keep the change.

With a charitable gift annuity, however, it works a little bit differently.

How Does a Charitable Gift Annuity Work?

With a charitable gift annuity, the contract is drawn up not between the buyer and an insurance company or bank (as with a standard annuity), but between a donor and a qualified charity. The donor makes a gift to the charity, some of which is used immediately for whatever needs the organization supports. However, part of the money is set aside in a reserve account, where it’s invested and will grow. Money from the reserve account—both principal and interest—are used to pay out the monthly stipend the beneficiary or beneficiaries receive.

Charitable annuity payments are made to the donor and beneficiary until both have passed away—at which point, the extra money is kept by the charity and used for charitable purposes.

In this way, the buyer of a charitable gift annuity can make a gift to a cause they support even after they’re gone, all while helping themselves create a secure and reliable retirement income in the meantime.

What are the Benefits of Charitable Gift Annuities?

Along with helping donors support a charity of their choosing both in and after life, charitable annuities have some other features that can make them attractive retirement vehicles for some people.

Non-Cash Donations

Many charitable gift annuities allow donors to contribute non-cash donations, including fixed income securities and investments—but also tangible items like art and real estate. Having this option means that donors might save money on taxes down the line. Annuity income is generally taxed as normal income at both the federal and state levels, but by donating physical securities, buyers of charitable gift annuities might pay less in capital gains taxes. (That said, regular income tax will still apply on any and all income received through the annuity.)

Payment Flexibility

Another nice thing about charitable gift annuities is the flexibility buyers have in receiving the payments when there are more than one beneficiary. Payments can either be structured to go to both beneficiaries at once, or to only kick in for the second beneficiary after the death of the first. In any case, any leftover funds will be donated to the charity when all beneficiaries have passed away.

Alternatives to Charitable Gift Annuities

Although charitable gift annuities can be a valuable tool, they may not be the right choice for every investor for a variety of reasons, including:

•   Gift annuities tend to have lower rates than most commercial annuity types, so they might not maximize your retirement income.
•   If you don’t have physical assets to donate, there may be more efficient ways to invest your cash.
•   Income streams from any type of annuity are usually still subject to federal and state income tax, unless they’ve been purchased using a Roth IRA or Roth 401(k), whose funds have already been taxed.

For investors who’d like more control over their investments, and fewer restrictions around when and how they can access the money, there are other places to put your retirement money.

One likely option is to take advantage of an employer-sponsored retirement account like a 401(k) at work. And almost anyone can bolster their retirement savings by investing in an IRA. Those under set income limits can invest in a Roth IRA, which will allow them to take tax-free distributions once they reach retirement age.

Even if you choose an alternative retirement option, you can continue to make donating to charities part of your financial lifestyle. It may even be possible to set aside money for charitable giving while on a tight budget.

The Takeaway

A charitable gift annuity is an annuity in which a donor contributes money to a charity, with the promise of getting regular payments in return later in life—for themselves and an optional beneficiary. Part of the initial payment, as well as any leftover funds, are donated to the participating charity after all the beneficiaries have died, making it a good way to secure retirement income while being charitable at the same time.

While a charitable annuity may be attractive to some investors, other types of retirement savings may allow an individual more nuanced control of their investments and more flexibility in the size and frequency of their withdrawals upon retirement.

There are many ways to invest for retirement, including opening a traditional, Roth, or SEP IRA with a SoFi Invest® online investing account. Members can choose between an active or automated account, and get access to a broad range of investment options, member services, and a robust suite of planning and investment tools.

Find out how to plan for retirement with SoFi Invest.


SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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.

SOIN0523095

Read more
Jun
22
2023

Investing in Retail Stocks

By | Growing Wealth, invest, Investing | Comments Off on Investing in Retail Stocks

When a consumer walks into a favorite store and spends money there, they might wonder if they should invest in that brand. Enter: retail stocks–companies that sell everything from clothing, books, computers, homeware, tools, groceries to auto parts.

It may feel like a good idea to invest in retail stocks because we’re familiar with their stores, the products and understand the brand identities.

However, retail investing can actually be tricky, especially in today’s ecosystem. Retail companies have dealt with a lot in recent years: shifting consumer preferences, the rise of online shopping, a slew of store closures, trade wars, a global pandemic that brought about quarantine measures.

Here are some things you need to know about retail stocks before diving into them.

How to Invest in Retail Stocks

First, investors need to check to see if the retail company is public. Being public means shares of the business are available for any investor to buy in the stock market. They can do this by looking up the company’s stock ticker symbol on the internet or via their brokerage account. For those who just want exposure to the industry as a whole, they can find a retail-stock exchange-traded fund, or ETF.

Recommended: What Is an ETF?

Why do retail companies go public? Typically in order to raise additional funds that are used to open more stores, expand overseas, invest in their e-commerce platform, or buy another retail company.

As a stockholder in a retail company, the investor holds a partial ownership, or a share, of the business. The owner of a stock is also entitled to dividends the company may disburse, and benefit from any potential increase in its share price. They also have the right to participate in shareholder votes.

Being a retail investor isn’t for the faint of heart. It takes a lot of due diligence. Investors should read quarterly earnings reports the company makes, monitor for any additional announcements the company makes related to company performance or new products, and pay attention to management changes like a new CEO or CMO.

Recommended: Reading an Earnings Report

It also takes an investor who isn’t afraid of a little volatility. Retail stocks can be particularly turbulent when reporting earnings for the back-to-school or holiday seasons–when many companies make a majority of their sales.

Changes in the Retail Industry

Remember back in the day when the mall was the place everyone went to hang out or go shopping? That reality has shifted radically with the advent of ecommerce. Consumers have increasingly migrated online to make their purchases, and retail companies have had to change alongside them.

Take holiday spending, the most important season for many retailers. Online spending has continued to outpace in-store spending, with the gap widening in recent years due to mobile spending.

The shift also accelerated as the Covid-19 pandemic caused consumers to avoid crowds and buy more through web purchases, according to a 2020 Deloitte survey . The average spend online in 2020 was $892 versus $390 in person, the survey shows.

Question: What percentage of your total holiday budget do you expect to spend…

2015

 2016

 2017

 2018

 2019

 2020
Online? 51% 50% 55% 57% 59% 64%
In-store? 46% 45% 38% 36% 36% 28%

Source: Deloitte

The e-commerce revolution has changed the stores along Main Street or malls into more of a marketing tool, rather than a first point of sale. Over the last few decades, stores have had to adapt to create exclusive consumer experiences only found in-store.

Those that couldn’t keep up with the changing times had to shut their doors. According to research and advisory group Coresight Research, a record 10,000 stores could close in the U.S. in 2021. That would mark a 14% jump in total closures from 2020. Coresight also predicted about 4,000 store openings in 2021, but mainly by discount grocers and dollar-chain stores.

Looking at Retail Stock Metrics

Here are some ways investors can evaluate whether to invest in a public retail company:

1. Visit a few physical locations. This way, an investor can get a sense of what’s happening on the ground. Is the store selling timely merchandise? Is the store well lit and laid out? Is there a lot of foot traffic? All of these are important ways an investor can try to gauge a company’s health.
2. Visit the store’s online platform. If the store’s e-commerce operation seems strong, it is easy to navigate and offers customer service. This, too, points to the good health of a company.
3. Next, it’s time to dig deeper into the company’s finances. Some measures that can be particularly helpful to retail investors include comparable store sales–also known as same-store sales. These are sales trends of stores that have been open at least one year.
4. Also examine margins, or how much the revenues a company makes after subtracting the cost of goods sold (COGS), and inventories, or how much in goods the company has stocked. Too much inventory can signal slow sales, while too little may be a sign of operational or production issues down the road. These numbers may fluctuate depending on the season.
5. Use traditional valuation metrics, such as price-to-earnings ratio or price-to-sales ratio. Public retail companies are required to report net income and revenue figures, which investors can use to gauge how expensive or cheap the shares are trading at.
6. Pay attention to broader industry trends by looking at earnings of competitors or changes in e-commerce trends. The National Retail Federation (NRF) could also be a good resource for information.

Possible Risks of Investing in a Retail Stock

Like all investments, retail stocks can come with risks. Take the global Covid-19 pandemic, which led to a quarantine across many cities in the world in 2020, causing consumers to be stuck at home and be wary of visiting stores.

Here are some of the other ways the industry can be vulnerable:

•   Retail stocks can be highly cyclical, or tied to economic conditions. In a recession, non-essential purchases may be the first to go for many consumers and may cause an otherwise healthy retail store to sink. Investors may benefit from balancing their portfolio with non-cyclical companies, like utility, telephone or health-care stocks.

Recommended: Why Portfolio Diversification Matters

•   Retailers are often at the mercy of changing regulations. This could include rising minimum wages or regulation changes in a supply chain.
•   Retail stocks are also often at risk of consolidation. The retail industry is shrinking in some ways, with larger players constantly buying or swallowing up smaller companies. This causes a rapidly changing landscape that must be monitored at all times.

Recommended: What Happens to a Stock During a Merger?

The Takeaway

Retail businesses can be volatile stock investments, going up and down with the seasons, along with changes in consumer confidence. Furthermore, the e-commerce and mobile phone revolution has added pressures to the retail financial landscape.

Investing in retail stocks involves keeping tabs on how brands are dealing with shutting malls, building digital platforms and changing expectations among consumers. Investors can also benefit from understanding more retail-specific metrics like same-store sales, margins and inventories. They can also use traditional valuation measures like P/E or P/S ratios.

It takes time and research to invest in retail stocks. With SoFi Invest®’s Active Investing platform, investors can pick and monitor the retail companies they’d like to be shareholders of. If a particular company’s price is outside what an investor can afford, they may be able to buy fractional shares, or stock bits of a whole stock, through SoFi’s Stock Bits offering.

Try trading Stock Bits on SoFi Invest today.


SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Stock Bits
Stock Bits is a brand name of the fractional trading program offered by SoFi Securities LLC. When making a fractional trade, you are granting SoFi Securities discretion to determine the time and price of the trade. Fractional trades will be executed in our next trading window, which may be several hours or days after placing an order. The execution price may be higher or lower than it was at the time the order was placed.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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.

SOIN0523092

Read more
Jun
22
2023
Quant Trading: What It is and How to Do It

Quant Trading: What It Is and How to Do It

By | Financial Independence, Growing Wealth, invest, Investing, Terminology | Comments Off on Quant Trading: What It Is and How to Do It

Quant trading is a trading strategy that relies on quantitative analysis, employing statistical and mathematical models to find profitable trades.

Quantitative analysis takes advantage of the massive amount of market data, as well as recurring trends, to offer investment insights and evaluate stock performance. As a strategy, quant trading uses that analysis of a given stock’s metrics, including price and volume, to predict performance and make bets based on those predictions.

What is Quantitative Trading?

Historically, quant trading has been the province of large, institutional investors and hedge funds, who have had access to sophisticated research and computer models that make it easier to use technical analysis to research stocks. But that’s starting to change, with more individuals taking advantage of the tools that the internet has provided to engage in a host of quantitative trading strategies.

Some of the most common quantitative trading strategies include statistical arbitrage, high-frequency trading and algorithmic trading. Most of those tactics involve trades with very short time horizons.

What different quant strategies have in common is that they use data-based models to locate trading opportunities, and to calculate the likelihood of a positive outcome for those opportunities. Unlike some investment strategies, it doesn’t rely on deep research of the companies underlying the securities themselves. Rather, it looks to statistical methods and computer models to find promising trades.

How Quant Traders Track Data Points

Most quant traders start by tracking specific data points. While most commonly tracked data points are price and volume, any metric can be used to build a strategy. There are some traders who even build programs to monitor social media for investor sentiment.

Quant traders use that data to discover trends or correlations that have proven to be predictive of certain outcomes, such as a stock going up or down. Then they will build a model to identify those trends and correlations as they occur. Some investors, especially high-volume investors, will even go so far as to automate their trading to execute purchases and sales whenever those conditions arise.

For example, a quant trader who believes in the power of market momentum might write a computer program that teases out stocks that have won in previous upward market swings. When the markets begin another bull run, a simple version of that program will either alert the trader to those stocks, or buy them directly. A more complex version of the program might identify a common metric for the stocks that had excelled during the last runup, and then build a repository of those stocks for when the next upward swing.

That example could equally apply to stocks in a down market, or stocks during sinking interest rates, or stocks during periods of persistently low unemployment. A quant trader looks at the math to anticipate the next market moves.

Getting Started With Quant Trading

For an investor who is looking to build their own models for quant trading, they need to find the right software to get started. Some of these programs can be expensive, and many require a major time investment to use them well. So it’s helpful to do some research before choosing a software package.

If an investor is looking for software that will help them build models, spot opportunities, and execute trades, then the stakes of choosing the right software are even higher. These software packages are typically provided by brokerages, or from specialized software firms. Most ready-made quant trading software suites will offer free trial versions that allow customers to try them out. But they can come with blind spots, or shortfalls that can cost an investor real money. That’s why some more tech-savvy and adventurous investors will go so far as to build their own software to identify—and act on—investment opportunities.

Features to Look for in Quant Trading Software

Most ready-made trading software packages offer real-time market data and price quotes. Quant traders want access to company fundamentals such as P/E ratios, earnings and other metrics updated in real time. And lacking that, they should look for software programs that allow them to easily integrate outside data sources, which can open up new and unique possibilities for research and discovery.

Recommended: How to Calculate Earnings Per Share

Depending on the breadth of their outlook, quant traders may want to trade across several different markets. But each exchange might provide data via a different digital language. Be sure that any software package can integrate feeds in these different formats, or that it has access to popular third-party data purveyors such as Bloomberg or Reuters.

While those capabilities will help quant traders focus on the right data and build the right models, there’s another side, namely trading on those models. This is where finding or building the right software can make or break a quant trader.

For quant traders, especially traders who make many short-term trades in the course of a day, one vital feature for software comes down to latency. If it takes 0.2 seconds for a price quote to get to your software vendor’s data center from the exchange, and it takes 0.3 seconds for it to get from there to your screen, and then 0.1 seconds for the trading software you use to process the data, and then another 0.3 seconds for the trading software to receive the data, analyze it, and make a trade, that matters. Especially in quant trading, time is money. But the lag continues. It may take 0.2 seconds for a trade order to get to a broker, and another 0.3 seconds for the broker to deliver that trade order to the exchange.

Especially in a stock hat’s seeing heavy volume, that 1.4 seconds could mean the difference between a successful and unsuccessful trade. That means that any delay in a software constitutes a real disadvantage to a quant trader, and should be considered when buying software.

Pros and Cons of Quant Trading

Emotion can be one of the biggest obstacles to successful trading. Investors may hold onto losing positions too long, thinking they’ll turn around. And they may let winning investments run too long, and lose money when they take a turn. But computer models have no emotions. That’s one reason why quantitative trading is so popular.

That said, quantitative trading can come with its own unique problems. The main one is that the financial markets are always changing. The rules, trends, correlations, cycles and even fundamental logic of the markets often seem to change with dizzying speed. As a result, even the most back-tested and seemingly promising quantitative trading model will occasionally fail. And while many models and trading programs may be profitable for a time, a successful quant trader is always looking for the next big change.

Some investors may find that using fundamental analysis on stocks offers a bit of the best of both worlds. Fundamental analysis incorporates both quantitative and qualitative analysis, in an effort to create a better overall picture of a given stock.

The Takeaway

Quant trading—once the province of institutions and hedge funds—has gone mainstream. Individuals are getting in on this strategy, using data to try and predict the markets, rather than relying on emotion and instinct.

For individuals ready to jump into investing, SoFi Invest® online brokerage offers an active investing solution that allows you to choose your stocks and ETFs without paying commissions. SoFi Invest also offers an automated investing solution that invests your money for you based on your goals and risk, without charging a SoFi management fee.

Find out how to get started with SoFi Invest.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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

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

SOIN0523093

Read more
Jun
22
2023
25+ Potential Ways to Invest in a Carbon-free Future

27 Potential Ways to Invest in a Carbon-free Future

By | Growing Wealth, invest, Investing | Comments Off on 27 Potential Ways to Invest in a Carbon-free Future

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

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

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

How Carbon Impacts Our Planet

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

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

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

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

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

Climate-Friendly Industries and Companies to Invest In

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

1. Carbon Offsets

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

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

2. Carbon Credits

Carbon credits give a company the right to emit only a certain amount of carbon dioxide or other greenhouse gases.

They create a cap on the amount of emissions that can occur, and then the right to those emissions can be bought and sold in the market. Caps may be placed on nations, states, companies, or industries.

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

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

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

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

3. ESG Indices and Impact Investing ETFs

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

4. Climate and Low-Carbon ETFs

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

5. Carbon Capture, Sequestration, and Storage

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

6. Products and Materials Made from Captured Carbon

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

7. Tree-Planting Companies and Sustainable Forestry

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

8. Regenerative Agriculture

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

9. Green Bonds and Climate Bonds

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

10. Blue Bonds

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

11. Refrigerant Management and Alternatives

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

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

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

12. Plant-based Foods

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

13. Food Waste Solutions

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

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

14. Biodiversity and Conservation

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

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

15. Sustainable Aquaculture

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

16. Green Building Materials

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

17. Water

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

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

18. Green Shipping

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

19. Electric cars and bicycles

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

20. Telepresence

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

21. Bioplastics

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

22. Energy Storage

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

23. Green Building

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

24. Recycling and Waste Management

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

25. Sustainable Food

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

26. Sustainable Fashion

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

27. Renewable and Alternative Energy

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

Recommended: How to Invest in Wind Energy for Beginners

The Takeaway

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

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

Find out how to get started with SoFi Invest.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

SOIN0523088

Read more
Jun
22
2023
man on tablet

Tips on How to Pay for MBA School

By | Budgeting & Goals, Building Your Career, Fresh Out of School, Life & Career, Student Loans, student_loan | No Comments

Getting a Master of Business Administration is an investment. Tuition costs vary widely depending on the school, but the average cost of an MBA is $61,800 for a program in the U.S.

If you’ve committed to pursuing an MBA, the reality is that a higher income is probably still a few years away. However, you’re responsible for the cost of schooling now. It can be daunting, but there are options for making business school more affordable. Here are a few tips to evaluate as you craft a plan to pay for your MBA program.

Saving Up in Advance

If you’re already employed, and especially if you earn a high salary, it may make sense for you to stay in your gig for a few more years and put money away toward your degree. The more you save now, the less you may have to take out in loans later. If you’re interested in accelerating your savings, consider cutting your expenses to prepare for the lifestyle change of becoming a student again.

Taking Advantage of Free Money

There are a plethora of scholarships, grants, and fellowships available for business students. If you manage to land one, they can help reduce your costs slightly or significantly, depending on the size of the award.

When hunting for scholarships, consider starting with the schools you’re thinking of attending. Many institutions offer their own need- or merit-based scholarships and fellowships, some of which may even fund the entire cost of MBA tuition. Many, but not all, of these are geared toward specific groups of students.

Awards may be based on academic excellence, entrepreneurship, and for those committed to careers in real estate or finance. Contact your school’s admissions or financial aid departments to learn about the opportunities you qualify for.

Getting Sponsored by a Company

Some employers offer to pay for all or part of an MBA degree. In exchange, they may require that you work there for a certain time period beforehand and commit to maintaining your employment for some time after you graduate.

Some companies may offer relatively modest grants, while others might offer to cover the bulk of tuition costs. Some companies that offer tuition reimbursement for employees pursuing MBAs include Deloitte, Bank of America, Apple, Intel, Procter & Gamble, and Chevron.

If you can land a job at a company that offers this benefit, it can be a major help in paying for school and reducing your debt burden. Just be sure that you’re willing to meet the commitments, which in most cases means staying with your employer for a while.

Taking Out Student Loans

If you can’t make up the full cost of tuition and living expenses through savings, scholarships, or sponsorships, borrowing student loans is another option. You might first consider borrowing from the federal government, as federal loans offer certain borrower protections and flexible student loan repayment options.

Federal Student Loans

To apply for federal student loans, first fill out the Free Application for Federal Student Aid (FAFSA®). The school you attend will determine the maximum you’re able to take out in loans each year, but you don’t have to take out the full amount. You might choose to only borrow as much as you need, since you’ll have to pay this money back later—with interest, of course.

Graduate students are generally eligible for Direct Unsubsidized Loans (up to $20,500 each year) or Direct PLUS Loans. Neither of these loans is awarded based on financial need.

Both of them accrue interest while the student is enrolled in school. Unless you pay the interest while you’re in school, it will get capitalized (or added to the principal of the loan), which can increase the amount you owe over the life of the loan.

Direct Unsubsidized Loans will have a six-month grace period after graduation in which you won’t have to make principal payments (remember, interest still accrues). Direct PLUS Loans, however, do not have a grace period, so principal payments are due as soon as you earn your degree.

Private Student Loans

If you aren’t able to borrow as much as you need in federal loans, you can also apply for MBA student loans with private lenders, including banks and online financial institutions.

Private student loans will have their own interest rates, terms, and possible benefits. Make sure to research the different lenders out there and see which is the best fit for your financial situation.

Paying Student Loans Back

Taking out a big loan can be daunting, but there are options for making repayment affordable, especially with federal loans. The government offers four income-based repayment plans that tie your monthly payment to your discretionary income.

If you make all the minimum payments for 20 or 25 years, depending on the plan, the balance will be forgiven. (However, the amount forgiven may be considered taxable income.) If you run into economic hardship, you can apply for a deferment or forbearance, which may allow eligible applicants to reduce or stop payments temporarily.

If you put your degree to use at a government agency or nonprofit organization, you may also qualify for Public Service Loan Forgiveness. If you meet the (extremely stringent) criteria, this program will forgive your loan balance after you make 120 qualifying monthly payments (10 years) under an income-driven repayment plan.

Refinancing Student Loans

If you’re still paying off student debt from college or another graduate degree as you enter your MBA program, you could consider looking into student loan refinancing.

This involves applying for a new loan with a private lender and, if you qualify, using it to pay off your existing loans. Particularly if you have a solid credit and employment history, you might be able to snag a lower interest rate or reduced monthly payment.

While there are many advantages of refinancing student loans, there are also disadvantages, as well. If you refinance federal student loans, you lose access to federal forgiveness programs and income-based repayment plans. Make sure you do not plan on taking advantage of these programs before deciding to refinance your student loans.

The Takeaway

MBA programs can offer a valuable opportunity to advance your career and increase your income, but they can also come with a hefty price tag. Options to pay for your MBA degree can include using savings, getting a scholarship, grant, or fellowship, or borrowing student loans. Everyone’s plan for financing their education may be different and can include a combination of multiple resources.

Making existing loans manageable while you’re in school can go a long way to making your MBA affordable. Down the line, you can consider refinancing the loans you take out to get you through your MBA program. You can get quotes online in just a few minutes to help figure out whether refinancing can get you a better deal.

If you do decide to refinance your student loans, consider SoFi. SoFi offers an easy online application, flexible terms, and competitive rates.

See if you prequalify for student loan refinancing with SoFi.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

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.

SOSL0523022

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender