Sep
26
2024
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Guide to Environmental, Social, and Governance (ESG) Investing

By | Growing Wealth, invest, Investing, Terminology | Comments Off on Guide to Environmental, Social, and Governance (ESG) Investing

What Is ESG?

ESG, which stands for environmental, social, and governance factors, refers to non-financial criteria that investors can use to determine whether companies are socially and environmentally responsible.

ESG investing is considered a form of sustainable or impact investing, but the term itself is more specific to emphasize that companies must focus on positive results in these three areas.

There is, however, no universally shared set of ESG criteria used by all investors or financial firms to evaluate a company’s soundness or risk along these lines. Rather, investors must learn which standards a certain fund or stock adheres to before choosing to invest.

Even so, there has been growing interest in ESG strategies in the last decade, as many of these funds have shown themselves to offer competitive returns vs. traditional strategies.

What Is ESG Investing?

As discussed, investors use ESG criteria to screen potential investments; if a business’s operations don’t follow ESG standards, investors may avoid putting money into the company. In that sense, ESG investing can be seen as a type of socially responsible investing.

But, as mentioned above, there is no universal set of standards for what makes a company ESG friendly. Companies committed to ESG operations may publish sustainability reports to give investors some insights into the firm. Additionally, third-party organizations have stepped in to create ESG scores for companies and funds based on their adherence to various ESG factors.

The following are some of the common factors that investors consider when evaluating the three different ESG areas.

Environmental

The environmental component of ESG criteria might include metrics on a company’s energy emissions, waste, and water usage. Investors may also focus on the risks and opportunities associated with the impacts of climate change on the company and its industry.

Some company information that environmentally conscious investors may evaluate include:

•   Pollution and carbon footprint

•   Water usage and conservation

•   Renewable energy integration (such as solar and wind)

•   Climate change policies

💡 Recommended: How to Invest in EV Stocks

Social

The social component of ESG generally describes the impact of a company’s relationships with people and society. Factors as varied as corporate culture, commitment to diversity, and how much a company invests in local organizations or communities can impact socially conscious investors’ decisions on buying into a specific corporation.

Some other social factors can include:

•   Employee pay, benefits, and perks

•   Diversity, equity, and inclusion

•   Commitment to social justice causes

•   Ethical supply chains (e.g., no sweatshops, conflict-free minerals, etc.)

Governance

The governance component of ESG generally focuses on how the company is run. Investors want to know how the board of directors, company, and shareholders relate to one another.

Some additional governance factors that investors evaluate include:

•   Executive compensation, bonuses, and perks

•   Diversity of the board of directors and management team

•   Transparency in communications with shareholders

•   Rights and roles guaranteed to shareholders

How ESG Scores Work

ESG scores — sometimes called ESG ratings — are designed to measure a company’s performance based on specific environmental, social, and governance criteria. Investors can use them to assess a company’s success, risks, and opportunities concerning these three areas.

An ESG score is typically calculated by analyzing a company’s available data on environmental, social, and governance policies and practices using various sources, like SEC filings, government databases, and media reports.

A high ESG score means a company manages ESG risks better than its peers, while a low ESG score means the company has more unmanaged ESG risks. Evaluating a company’s ESG score, along with financial analysis, can give investors a better idea of the company’s long-term prospects.

Some of the most prominent ESG score providers are MSCI, Morningstar Sustainalytics, and S&P Global. But some financial firms conduct their own ESG evaluations and provide proprietary scores. Transparency into how the scores are calculated can vary.

ESG vs SRI vs Impact Investing

ESG investing is sometimes called sustainable investing, impact investing, or socially responsible investing (SRI). However, impact investing and socially responsible investing are often viewed differently than ESG investing.

Some of the differences between the three investment strategies are:

•   ESG investing focuses on a company or fund’s environmental, social, and governance practices and traditional financial analysis.

•   Socially responsible investing eliminates or selects investments according to specific ethical guidelines. Investors following an SRI strategy may avoid investing in companies related to gambling and other sin stocks, or they may avoid companies that cause damage to the natural environment — or both.

•   Impact investing is generally done by institutional investors and foundations. Impact investing focuses on making investments in companies or projects specifically designed to generate positive social or environmental impact.

In addition there is another designation investors may want to know, green investing refers to strategies that are purely focused on benefiting the environment.

Last, corporate social responsibility initiatives, or CSR refers to programs and initiatives that organizations may establish on their own. Often, these business decisions support socially responsible movements, like environmental sustainability, ethical labor practices, and social justice initiatives.

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Why Is ESG Investing Important?

ESG investing is important because it offers investors a way of putting their money into causes that are significant to them, with the hope of having a genuine impact via their investments in certain companies or funds. This is why ESG is often called impact investing, although true impact investing is a broader term, and refers to a range of companies that may or may not be focused on sustainable issues.

Whether or not companies or funds that embrace ESG strategies deliver on the promised goals is a matter for investors to decide via due diligence. As noted above, without a commonly agreed-upon set of standards and some form of accountability, it’s difficult to ascertain which companies are truly having an impact.

Are ESG Strategies Profitable?

Nonetheless, investors have continued to be interested in ESG strategies. In 2021, socially responsible U.S. mutual funds saw record inflows of some $70 billion — a 36% increase over 2020. ESG funds saw substantial outflows through 2021 and most of 2022. But sustainable funds still managed to outperform non-sustainable funds through Q3 of 2022, despite challenging market conditions, according to Morningstar research as of September 30, 2022.

During the third quarter of 2022, sustainable large-cap funds netted $525 million, versus their unsustainable equity peers, who lost $25 billion that period.

Two other studies from Morningstar added to the evidence that funds which embrace socially responsible investing strategies tend to outperform conventional mutual funds.

Their “Sustainable Funds U.S. Landscape Report” from February 2022 found that “two thirds of sustainable offerings in the large-blend category topped the U.S. market index last year compared with 54% of all funds in the category.”

According to the report: “There are 5 times as many sustainable funds in the U.S. today than a decade ago, and 3 times more than five years ago.”

Types of ESG Investments

Investors can make ESG investments in the stocks and bonds of companies that adhere to ESG criteria or have high ESG scores. Other potential investment vehicles are mutual funds and exchange-traded funds (ETFs) with an ESG strategy.

Stocks

Buying stocks of companies with environmental, social, and governance commitments can be one way to start ESG investing. However, investors will often need to research companies that have ESG credibility or rely on third-party agencies that release ESG scores.

💡 Recommended: How to Analyze a Stock

Bonds

The bonds of corporations involved in ESG-friendly business practices can be a good option for investors interested in fixed-income securities. Green and climate bonds are bonds issued by companies to finance various environmentally-friendly projects and business operations.

Additionally, government bonds used to fund green energy projects can be an option for fixed-income investors. These bonds may come with tax incentives, making them a more attractive investment than traditional bonds.

💡 Recommended: How to Buy Bonds: A Guide for Beginners

Mutual Funds and ETFs

Investors who don’t want to pick individual stocks to invest in can always look to mutual funds and exchange-traded funds (ETFs) that provide exposure to ESG companies and investments.

A growing number of index funds invest in a basket of sustainable stocks and bonds. These funds allow investors to diversify their holdings by investing in one security.

However, not all ESG funds follow the same criteria and may focus on different aspects of environmental, social, and governance issues. Interested investors would do well to look under the hood of specific funds to evaluate their holdings and other criteria.

💡 Recommended: A Beginner’s Guide to Investing in Index Funds

Identifying ESG Companies

What is the best way to find an ESG company? There are a number of resources available for ESG investors, including proprietary tools that allow investors to search and/or evaluate different stocks based on specific criteria.

There are also a number of lists published by financial media companies that evaluate companies and funds according to ESG criteria.

Financial ratings firms like Morningstar publish regular research reports on different aspects of the ESG sector.

In addition, many industry firms and fund-providers have their own proprietary evaluation methods that investors might consider. Here are five of the biggest companies that provide ESG ratings, according to Fortune.com.

•   FTSE Russell: Publishes ESG ratings on 7,200 securities

•   ISS ESG: Provides ratings on 11,800 issuers and 25,000 funds

•   MSCI: Publishes ESG ratings for over 8,000 companies worldwide

•   Refinitiv: Calculates ESG scores on 11,800 companies

•   Sustainalytics: Publishes ESG ratings on more than 13,000 companies

Benefits of ESG Investing

ESG investing has several benefits, including:

•   Improving long-term financial performance: A growing body of evidence suggests that companies with solid ESG ratings may be good investments. They tend to outperform those with weaker ratings, both in share price performance and earnings growth.

•   Mitigating risk: ESG factors can help identify companies with poor governance practices or exposure to environmental and social risks, leading to financial losses.

•   Creating social and environmental impact: By investing in companies that are leading the way on environmental, social, and governance issues, investors can help drive positive change and make a positive impact on society.

These potential benefits are increasing the popularity of ESG investing. According to Bloomberg, global ESG assets may surpass $41 trillion by the end of 2022 and reach $50 trillion by 2025, up from $22.8 trillion in 2016.

Risks of ESG Investing

The main disadvantage of ESG strategies is that they limit the number of investments that people can consider. Thus, some investors may end up trading potential returns for the ability to invest according to their values.

In addition, ESG investments can sometimes come with higher costs, for example an ESG fund may have a higher expense ration vs. a traditional counterpart.

While there is a growing body of data regarding the performance of ESG indices and securities, it’s still a relatively new sector relative to more traditional investments.

Starting an ESG Investment Portfolio

If you’re interested in creating an ESG portfolio, you can start by contacting a financial advisor who can help you shape your investment strategy.

However, if you are ready to start investing and want to build a portfolio on your own, you can follow these steps:

•   Open a brokerage account: You will need to open a brokerage account and deposit money into it. Once your account is funded, you will be able to buy and sell stocks, mutual funds, and other securities.

•   Pick your assets: Decide what type of investment you want to make, whether in a stock of a company, an ESG-focused ETF or mutual fund, or bonds.

•   Do your research: It’s important to research the different companies and funds and find a diversified selection that fits your desires and priorities.

•   Invest: Once you’re ready, make your investment and then monitor your portfolio to ensure that the assets in your portfolio have a positive social and financial impact.

It is important to remember that you should diversify your portfolio by investing in various asset classes. Diversification will help to reduce your risk and maximize your returns.

ESG Investing Strategies

ESG investing can be different based on values and financial goals. It’s therefore essential to start with your investment goals and objectives when crafting an ESG investing strategy. Consider how ESG factors can help you achieve these goals.

It’s also crucial to understand the data and information available on ESG factors; this will vary by company and industry. When researching potential ESG investments, you want to make sure a company has a clear and publicly-available ESG policy and regularly discloses its ESG performance. Additionally, it can be helpful to look at third-party scores to determine a company’s ESG performance.

The Takeaway

In recent years, investor interest in sustainable investing strategies like ESG has grown. In addition, there is some data that suggests that ESG strategies may be just as effective as traditional strategies in terms of performance.

This is despite the fact that ESG criteria are inconsistent throughout the industry. There are a myriad different ways that companies can provide ESG-centered investments, but there aren’t industry-wide benchmarks for different criteria or success metrics.

Thus, it’s fair to say that there is no “right” way to invest in ESG companies. What matters most is that you have done your own research; you are comfortable with the companies you are investing in; and you believe in their ability to create long-term value.

Investors interested in making ESG investments can use the SoFi app to help. When you open an Active Invest account with SoFi Invest®, you can trade stocks and ETFs to build an ESG portfolio. SoFi doesn’t charge commissions (although operating expense ratios and other fees may apply to exchange-traded funds), and SoFi members have access to complimentary advice from financial professionals.

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

What are the three pillars of ESG?

ESG stands for three areas that some companies strive to embrace by being proactive about the environment, supportive of social structures, and transparent and ethical in corporate leadership.

What are some examples of ESG investing?

There are countless ways to add ESG strategies to your portfolio: You can consider investing in green bonds, in companies that focus on environmentally supportive technologies, in funds that invest in a multitude of renewable energy companies, clean water initiatives, carbon sequestration, and more.

What is the difference between ESG and sustainability?

Sustainability is a broader term. Environmental, social, and governance factors may support sustainability in different ways: by limiting air or water pollution, by supporting fair labor practices, by insisting on transparency in corporate governance.

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.

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Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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

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

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Sep
06
2024
eggs in a nest mobile

Building a Nest Egg in 5 Steps

By | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off on Building a Nest Egg in 5 Steps

A nest egg can help you save for future goals, such as buying a home or for your retirement. Building a nest egg is an important part of a financial strategy, as it can help you cover important costs or allow you to become financially secure.

A financial nest egg requires some planning and commitment. In general, the sooner you start building a nest egg, the better.

What Is a Nest Egg?

So what is a nest egg exactly? A financial nest egg is a large amount of money that someone saves and/or invests to meet a certain financial goal. Usually, a nest egg focuses on longer-term goals such as saving for retirement, paying for a child’s college education, or buying a home.

A nest egg could also help you handle emergency costs — such as medical bills, pricey home fixes, or car repairs. There is no one answer for what a nest egg should be used for, as it depends on each person’s unique aims and circumstances.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

Understanding How a Nest Egg Works

There are a few things to know about how to successfully build a nest egg.

•   You have to have a plan. Unlike saving for short-term goals, building a nest egg takes time and you need a strategy. A common technique is to save a certain amount each month or each week.

•   You need to save your savings. This may sound obvious, but in order to save money every week or month, you have to put it in a savings or investment account of some sort. If you “save” the money in your checking account, you may end up spending your savings.

•   Don’t touch your nest egg. The flip side of that equation is about spending: In order for your nest egg to grow and for you to reach your savings goals by a certain age, you have to make it untouchable. When saving a nest egg, you have to keep your saved money out of reach and protect it.

How Much Money Should Be in Your Nest Egg?

There is no one correct and specific amount a nest egg should be. The amount is different for each person, depending on their needs. It also depends on what you’re using your nest egg for. If you’re using it to buy a house, for instance, you’ll likely need less than if you are using your nest egg for retirement.

As a general rule, some financial advisers suggest saving 80% of your annual income for retirement. However, the amount is different for each person, depending on the type of lifestyle they want to have in retirement. For instance, someone who wants to travel a lot may want to save 90% or more of their annual income.

A retirement calculator can help you determine if you’re on track to reach your retirement goals.

What Are Nest Eggs Used for?

As mentioned, nest eggs are often used for future financial goals, such as retirement, a child’s education, or buying a house.

A nest egg can also be used for emergency costs, such as expensive home repairs, medical bills, or car repairs.

💡 Recommended: Retirement Planning: Guide to Financially Preparing for Retirement

5 Steps to Building a Nest Egg

1. Set a SMART Financial Goal

The SMART goal technique is a popular method for setting goals, including financial ones. The SMART technique calls for goals to be (S)pecific, (M)easurable, (A)chievable, (R)elevant, and (T)ime bound.

With this approach, it’s not enough just to say, “I want to learn how to build a nest egg for emergencies.” The SMART goal technique requires you to walk through each step:

•   Be Specific: How much money is needed for an emergency? One rule of thumb is to save at least three months worth of living expenses, in case of a crisis like an illness or layoff. But you also approach it from another angle: Maybe you just want $1,800 in the bank for car and home repairs.

•   Make it Measurable and Achievable: Once you decide on the amount that’s your target goal, you can figure out exactly how to build a nest egg that will support that goal. If you want to save money from your salary, such as $1,800, you’d set aside $200 per month for nine months — or $100 per month for 18 months. Be sure to create a roadmap that’s measurable and doable for you.

Last, keeping your goal Relevant and Time-bound is a part of the first three steps, but it also entails something further: You must keep your goal a priority. And you must stick to your timeframe in order to reach it.

For example, if you commit to saving $200 per month for nine months in order to have an emergency fund of $1,800, that means you can’t suddenly earmark that $200 for something else.

2. Create a Budget

It’s vital to have a plan in order to create a nest egg — for the simple reason that saving a larger amount of money takes time and focus. A budget is an excellent tool for helping you save the amount you need steadily over time. But a budget only works if you can live with it.

There are numerous methods to manage how you spend and save, so find one that suits you as you build up your nest egg. There’s the 50-30-20 plan, the envelope method, the zero-based budget, etc. There are also apps that can help you budget.

Fortunately, testing budgets is fairly easy. And you’ll quickly sense which methods are easiest for you.

3. Pay Off Debt

Debt can be a major roadblock in building a nest egg, especially if it’s high-interest debt. Those who are struggling to pay down debt may not be able to put as much money into savings as they would like. Prioritizing paying down debt quickly can help save money on interest and reduce financial stress. Adding debt payments into a monthly budget can be one smart way to make sure a debt repayment plan stays on track.

If you’re having trouble paying down a certain debt, like a credit card or medical bill, it might be worth calling the lender. In some cases, lenders may work with an individual to create a manageable debt repayment plan. Calling the lender before the debt is sent to a debt collector is key, as many debt collectors don’t accept payment plans.

Debt Repayment Strategies

Here are two popular debt repayment strategies that might be worth researching: the avalanche method and the snowball method.

The avalanche method focuses on paying off the debt with the highest interest rate as fast as possible, because the interest is costing you the most. This method can save the most money in the long run.

The other option is the snowball method, which can be more motivating as it focuses on paying off the smallest debt first while making minimum payments on all other debts. When one debt is paid off, you take the payment that went toward that debt and add it to the next-smallest one “snowballing” as you go.

This method can be more psychologically motivating, as it’s easier and faster to eliminate smaller debts first, but it can cost more in interest over time, especially if the larger debts have higher interest rates.

4. Make Saving Automatic

Behavioral research is pretty clear: The people who are the most successful savers don’t mess around. They put their savings on auto-pilot, by setting up automatic transfers based on their goal.

Behavior scientists have identified simple inertia as a big culprit in why we don’t save. Inertia is the human tendency to do nothing, despite having a plan to take specific actions. One of the most effective ways to get around inertia, especially when it comes to your finances, is to make savings automatic.

Set up automatic transfers to your savings account online every week, or every month. While you’re at it, set up automatic payments to the debts you owe. Don’t assume you can make progress with good intentions alone. Technology is your friend, so use it!

5. Start Investing in Your Nest Egg

The same is true of investing. Investing can be intimidating at first. Combine that with inertia, and it can be hard to get yourself off the starting block. Also, you may wonder whether it makes sense to invest your savings, when investing always comes with a possible risk of loss (in addition to potential gains).

You may want to keep short-term savings in a regular savings or money market account — or in a CD (certificate of deposit), if you want a modest rate of interest and truly don’t plan to touch that money for a certain period of time. But for longer-term savings, especially retirement, you can consider investing your money in the market. SoFi’s automated investing can help you set up a portfolio to match your goals.

You can also set up a brokerage account and start investing yourself. Whichever route you choose, be sure to make the contributions automatic. Investing your money on a regular cadence helps your money to grow because regular contributions add up.

The Power of Compounding Interest

When saving money to build a nest egg in certain savings vehicles, such as a high-yield savings account or a money market account, compound interest can be a major growth factor. Put simply, compound interest is interest that you earn on interest.

Here’s how it works: Compound interest is earned on the initial principal in a savings vehicle and the interest that accrues on that principal. So, for instance, if you have $500 in a high-yield savings account and you earn $5 interest on that amount, the $5 is added to the principal and you then earn interest on the new, bigger amount. Compound interest can help your savings grow. Use the following compound interest calculator to see this in action.


With investments, compound returns work in a similar manner. Compounding returns are the earnings you regularly receive from contributions you’ve made to an investment.

Compound returns can be achieved by any type of asset class that produces returns on both the initial amount — or the principal — as well as any profits or returns that are generated after the initial investment. Some investment types that earn compound interest are stocks and mutual funds.

💡 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).

Why Having a Nest Egg Is Important

A financial nest egg can help you save for retirement and/or achieve certain financial goals, such as paying for your child’s education. By building a nest egg as early as you can, ideally starting in your 20s or 30s, and contributing to it regularly, the more time your money will have to grow and weather any market downturns. For instance, if you start investing in your nest egg at age 25, and you retire at age 65, your money will have 40 years to accumulate.

Investing in Your Nest Egg With SoFi

Like most financial decisions, building a nest egg starts with articulating goals and then creating a specific plan of action to reach them. Using a method like the SMART goal technique, it’s possible to build a nest egg for retirement, to buy a home, pay for a child’s education, or other life goals.

Because a nest egg is typically a larger amount of money than you’d save for a short-term goal, it’s wise to use some kind of budgeting system, tool, or app to help you make progress. Perhaps the most important ingredient in building a nest egg is using the power of automation. Use automatic deposits and transfers to help you save, pay off debt, and even to start investing.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


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

FAQ

What is a financial nest egg?

A financial nest egg is a substantial amount of money you save or invest to meet a certain financial goal. A nest egg typically focuses on future milestones, such as retirement, paying for a child’s college education, or buying a home.

How much money is a nest egg?

There is no one specific amount of money a nest egg should be. The amount is different for each person, depending on their needs and what they’re using the nest egg for. For instance, if a nest egg is for retirement, some financial advisers suggest saving at least 80% percent of your annual income.

Why is it important to have a nest egg?

A nest egg allows you to save a substantial amount of money for retirement or to pay for your child’s education, for instance. By starting to build a nest egg as early as you can, the more time your money has to grow.

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.

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.

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Aug
13
2024
What Is the SWIFT Banking System?

What Is the SWIFT Banking System?

By | Growing Wealth, invest, Investing | Comments Off on What Is the SWIFT Banking System?

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a secure communication network to financial institutions in order to communicate and facilitate cross-border transactions and payments.

The SWIFT system is a critical piece of infrastructure for the international banking system because it allows financial institutions to talk to one another securely. Without access to the SWIFT messaging network, banks are essentially shut out of the global financial system because they cannot speak to banks in other countries to agree to transaction and payment terms.

What Is SWIFT?

SWIFT doesn’t hold assets or move money around. Instead, it is a messaging system for banks and other financial institutions. When banks need to conduct business across borders with other financial companies, the SWIFT system allows them to communicate to one another in a secure and standardized manner to ensure reliable transaction terms.

The SWIFT messaging system relies on a standardized system of codes to transmit information and payment instructions. These codes are interchangeably called Bank Identifier Codes (BIC), SWIFT codes, SWIFT IDs, or ISO 9362 codes. Each member of the SWIFT network is assigned a BIC/SWIFT code, providing an efficient transfer of information during transactions.

The SWIFT codes are used so banks and financial institutions can communicate reliably. For example, a bank in the United States wants to make sure it is messaging the right bank in France to set up payment instructions before sending money.

Since SWIFT doesn’t send money, it requires banks to take additional steps to send money globally after communicating with their counterparty. This makes the whole process relatively slow and adds costs to the transfers. The advent of blockchain technology may alleviate these time lags and additional costs as the technology is adopted more broadly.

💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.

Format of BIC/SWIFT Code

These codes are unique and have 8 or 11 characters, identifying the bank, country, city, and branch.

•   Bank code (0-9 or A-Z): 4 characters representing the bank.

•   Country code (A-Z): 2 letters representing the country of the bank.

•   Location code (0-9 or A-Z): 2 characters of letters or numbers for the location of the bank.

•   Branch Code (0-9 or A-Z): 3 digits specifying a particular branch. This branch code is optional.

For example, Wells Fargo, with a branch in Philadelphia, has the 11-character SWIFT code PNBPUS33PHL. The first four characters reflect the institute code (PNBP for Wells Fargo), the next two are the country code (US), the following two characters specify the location/city code (33), and the last three characters indicate the individual branch (PHL). The last three characters are optional; if the bank is the head office, the code ends with XXX.

More SWIFT Code Examples
Bank Name Barclays Bank Plc Toronto-Dominion Bank MUFG Bank, Ltd.
SWIFT Code BARCGB22 TDOMCATTTOR BOTKJPJT
Bank Code BARC TDOM BOTK
Country Code GB (United Kingdom) CA (Canada) JP (Japan)
Location Code 22 (London) TT (Toronto) JT (Tokyo)
Branch Code XXX or not assigned (indicates head office) TOR XXX or not assigned (indicates head office)

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History of SWIFT

Telex was an early electronic communications system used in the post-World War II period, allowing businesses to send written messages across the globe. Before SWIFT, financial institutions used Telex to communicate with one another to ensure the successful transfer of international payments. However, Telex was slow, lacked security, and was prone to human error because it didn’t run on a standardized system.

To alleviate the problems of Telex, 239 banks from 15 countries joined forces in 1973 to develop a communications network that would provide safe, secure, and standardized messaging for cross-border payments. These banks formed the Society for Worldwide Interbank Financial Telecommunication and went live with the SWIFT messaging service in 1977. Soon, SWIFT was widely adopted and became the gold standard for cross-border messaging in the global financial system.

More than 11,000 financial institutions in over 200 countries use the SWIFT system to communicate. It processes tens of millions of messages per day, too. 

Who Controls SWIFT?

Based in Belgium, SWIFT is a member-owned cooperative, meaning that member institutions have stakes in SWIFT and the right to nominate directors to its governing board. This governing board is made up of 25 people from across the globe and overseen by the G-10 country central banks (Bank of Canada, Deutsche Bundesbank, European Central Bank, Banque de France, Banca d’Italia, Bank of Japan, De Nederlandsche Bank, Sveriges Riksbank, Swiss National Bank, Bank of England, USA Federal Reserve System), the European Central Bank, and the National Bank of Belgium.

Traditionally, SWIFT acts as a neutral party, so it doesn’t make any decisions on sanctions. However, because it operates under Belgian law and European Union regulations, SWIFT will adhere to sanctions imposed by the EU if necessary. This resulted in banks from Iran being kicked off the SWIFT system in 2012 because of the country’s nuclear weapon program. Additionally, in early 2022, several Russian institutions were kicked off of SWIFT after the country invaded Ukraine.

The Future of SWIFT

Because of SWIFT’s significant role in the global financial system, some believe that blockchain technology could circumvent the need to use the SWIFT network. Proponents of decentralized finance believe that these new technologies could increase global payments’ speed, security, and transparency. Just as SWIFT replaced Telex as the standard for messaging in the global financial system, some think that blockchain technology could do the same.

The Takeaway

SWIFT is a critical part of the global financial system. Without the secure messaging services of SWIFT, banks and other financial institutions would struggle to complete transactions and make payments in overseas business. However, the SWIFT system is relatively slow and costly for financial institutions. Even with the safe and secure messaging of SWIFT, cross-border payments and transfers between financial institutions can still take several days to complete. 

In a world that desires high-speed money transfers, this lag in transaction time can be burdensome to banks and other financial institutions. As new challengers in the global financial system, like blockchain technology, breakthrough and become a more mainstream part of the financial payments system, they could put pressure on the ubiquity of the SWIFT system and the overall global payments system.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 up to 4.30% APY on SoFi Checking and Savings.

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SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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How Does a Stock Exchange Work?

How Does a Stock Exchange Work?

By | Growing Wealth, invest, Investing, Terminology | No Comments

Stock exchanges are platforms that allow investors to buy and sell stocks in a venue that is regulated and transparent. These exchanges enable investors of all stripes to trade stocks and other securities, potentially benefiting from a stock’s share price appreciation and dividend payments.

Stock exchanges help the stock market work, and are a big part of the overall economy. Understanding stock exchanges and how they work may help you how they affect you and your investments.

What Is a Stock Exchange?

A stock exchange is a marketplace where the shares of publicly-traded companies are bought and sold between investors.

Exchanges are generally organized by an institution or association that hosts the market, like the New York Stock Exchange or Nasdaq. These organizations and government regulators – like the Securities and Exchange Commission (SEC) in the U.S. – set up the rules and regulations of what companies investors can trade on a stock exchange.

If a company is “listed” on an exchange, it means that the company can be traded on that exchange. Not all companies are listed because each exchange regulates which companies meet their requirements. Companies not listed on the exchange are traded over-the-counter, or OTC for short.

Investors who want to buy or sell stocks commonly trade through an investment broker, a person or entity licensed to trade on the exchanges. Brokers aim to buy or sell stock at the best price for the investor making the trade, usually earning a commission for the service. Most investors will now use online brokerage firms for this service, paying little to no commissions for trades.

Historically, stock exchanges were physical locations where investors came together on a trading floor to frantically buy and sell stocks, like what you may have seen in the movies or on TV. However, these days, more often than not, stock exchanges operate through an electronic trading platform.

Major Stock Exchanges

10 Largest Stock Exchanges by Market Capitalization of Listed Companies
Exchange Location Market capitalization (in trillions)*
New York Stock Exchange (NYSE) U.S. $28.8
Nasdaq U.S. $25.43
Euronext Europe $7.15
Shanghai Stock Exchange China $6.52
Tokyo Stock Exchange Japan $6.25
London Stock Exchange U.K. $5.63
Shenzhen Stock Exchange China $4.29
National Stock Exchange of India India $4.53
Hong Kong Exchanges Hong Kong $3.97
Saudi Stock Exchange Saudi Arabia $2.86
*As of August 2024

Why Do We Have Stock Exchanges?

Stock exchanges exist because they provide a place for buyers and sellers to come together and trade stocks. Stock exchanges are also important because they provide a way for businesses to raise money. When companies issue stock to raise capital, investors will then trade the company’s shares on the stock exchange in which it is listed.

The individual stock exchanges set the rules for how stocks are traded. Stock exchanges are also regulated markets, which means that a government agency oversees the activity on the exchange. These rules and regulations provide a level of safety for investors and help to ensure that the market is fair, transparent, and liquid.

💡 Not sure what a stock is? Here we explain what stocks are and how they work.

What Is the Stock Market?

The stock market is made up of a network of different stock exchanges, including OTC markets, and the companies that are traded on these exchanges.

When you hear mentions of the stock market and its performance, it is usually in reference to a particular stock market index, like the S&P 500 or Dow Jones Industrial Average. However, the stock market is more than the specific companies that make up these stock market indices.

Generally, stock markets facilitate the buying and selling of shares between companies and institutional investors through initial public offerings (IPOs) in the primary market. Once a company has an IPO, the company’s shares are traded in secondary markets, like stock exchanges.

Stock Market Volatility

Volatility in the stock market occurs when there are big swings in share prices. Share prices can change for various reasons, like a new product launch or the most recent earnings report. And while volatility in the stock market usually describes significant declines in share prices, volatility can also happen to the upside.

Pros of the Stock Market

As mentioned above, the stock market allows companies to raise capital by issuing shares to investors. Raising money was one of the main reasons why stock issuances and trading began. It allows businesses to raise money to expand a business without taking out a loan or issuing bonds.

And because investors can own shares of companies, they can benefit from the growth and earnings of a business. Investors can profit from a company’s dividend payments, realize a return when the stock’s price appreciates, or benefit from both. This helps investors build wealth.

The relationship between stock markets, companies, and investors has arguably led to more economic efficiency, allowing money to be allocated in more productive ways.

Cons of the Stock Market

For companies, issuing shares on the stock market may be onerous and expensive due to rules and regulations from the stock exchanges and government regulators. Because of these difficulties, companies may be wary of going through the IPO process. Instead, they are more comfortable raising money in the private markets.

There are several potential risks associated with investing in the stock market. For example, the stock market is subject to market volatility, resulting in losses. Investors must be willing to take on the risks of losing money for the possibility of gains in the future.

Additionally, there is the potential for stock market fraud and manipulation by companies and investors, which harms individual investors, companies, and the economy.

💡 Recommended: How Many Companies IPO Per Year?

The Takeaway

A stock exchange is a marketplace where investors can buy and sell stocks or other securities, and where companies can list shares to try and raise capital. There are numerous stock exchanges, but the biggest in the U.S. are the New York Stock Exchange, and the Nasdaq.

Knowing the ins and outs of stock exchanges and how they influence the broader stock market may help you become a better-informed investor. Further, by learning about stock exchanges, their different rules, and their advantages and disadvantages, you may better understand the stock market as a whole. This may allow you to invest confidently and prepare for future stock market volatility.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

What is the stock market?

The stock market is a collection of markets where stocks are traded between investors. It usually refers to the exchanges where stocks and other securities are bought and sold.

What are the benefits of investing in the stock market?

Some benefits of investing in the stock market include the potential for earning income through dividend payments, experiencing share price appreciation, and diversifying one’s financial portfolio beyond cash. Note, however, that there are significant risks associated with investing in the stock market, too.

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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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2024
Understanding a Retirement Gap Analysis

Understanding a Retirement Gap Analysis

By | invest, Investing, Preparing for Retirement | Comments Off on Understanding a Retirement Gap Analysis

A retirement gap analysis helps individuals identify a potential shortfall between how much they have saved and what they will need in retirement.

Tallying all accounts, projecting ahead, then comparing that amount to how much a fully funded retirement costs, given your unique circumstances, can help people bridge the financial gap between the present and retirement. It’s a great way to visualize how you are tracking towards your retirement goals.

What Is a Retirement Analysis?

A retirement analysis is typically a report a financial advisor creates for individuals who want to know if they are on track for retirement. The analysis can also be done using online tools. Saving for retirement is an important process for those who are looking forward to a secure future with a steady stream of income.

Knowing the difference between what you have saved versus what you will need in order to retire on time is valuable information to determine if you are on track for retirement. If necessary, you can then take extra steps to boost your savings rate once you have a retirement gap analysis and risk assessment performed. This might include such actions as changing your investing strategy or considering annuities, for instance.

A retirement gap analysis considers a range of retirement assets. Your 401(k) through your employer, any individual retirement accounts you might own, annuities, individual taxable brokerage accounts, and even Social Security are common assets to tally in a retirement gap analysis. The sum of those assets is then compared to what you will need in the future, so that you can retire with confidence.

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How Do You Conduct a Retirement Gap Analysis?

Conducting a retirement analysis can be done using online tools or by meeting with a financial advisor. It’s all about knowing when you can retire. Often, individuals will take action to improve their financial habits and retirement savings when they see what they must do.

What Goes Into a Retirement Gap Analysis?

For example, a retirement gap on a chart can be a powerful visual to inspire people to save more. Performing a retirement analysis requires careful input of all assets and some assumptions about future rates of return, as well as a person’s spending habits and goals in order to determine how long their savings and other assets may last.

Assets and liabilities are analyzed, and future cash flow is projected. Conducting a retirement analysis also includes estimating how long somebody might live. Longevity risk is a key consideration, and Social Security and annuities can help reduce the risk of running out of money. There are many facets to performing a retirement gap analysis. Seeking out the help of an experienced fiduciary advisor may be helpful so that you are confident in your retirement plan.

How Does Communication Come Into Play?

A critical factor of a retirement analysis is the communication aspect. This is where a financial planner could potentially show their skills.

Simply looking over investment accounts and seeing numbers on a spreadsheet might not cause people to change course on their journey to retirement. Communicating a retirement gap in the right context can help drive home the message that saving more today will lead to a better tomorrow.

How Does a 401(k) Plan Factor Into the Analysis?

A high-level retirement gap analysis should be mixed in with detailed cash flow planning.

Your 401(k) plan is a major account that is assessed during a retirement analysis. An employer-sponsored retirement account is a large part of many workers’ overall retirement plan. A 401(k) gap can be found by analyzing the value of a participant’s pre-tax and Roth accounts versus what they will need to retire.

A 401(k) account often features an employer matching contribution, which is almost like free money so long as you meet the plan’s matching contribution requirements. Many plans will match, say, 50% of the employee’s contribution up to 6%. For a $100,000 salary, that means $3,000 per year of employer contributions, in addition to $6,000 from the employee. That’s $9,000 per year.

A 401(k) account, among other retirement plans offered through work, is typically a major piece of someone’s retirement asset pie. The process to increase contributions to it is generally easy to do. Moreover, the auto-enrollment and auto-escalation features are tools that can help more people save more for retirement so that their 401(k) gap shrinks over time. A 401(k) analysis can be helpful for workers young and old.

Retirement Gap Analysis Example

Let’s run through a retirement gap analysis example to better show the steps involved.

Retirement Gap Analysis, Step-by-Step

 Rationale
Retirement Income Assessment: Summing all retirement savings accounts to find a portfolio value. Identifies any potential shortfall between required monthly income and total projected income between Social Security, retirement plans, and other accounts.
Review liabilities and future spending habits. No retirement gap analysis is complete without a thorough assessment of what you owe and current and future spending.
Analyze changes to an individual’s retirement date. Can make arriving at retirement easier if more time is allowed to increase saving.
Strategize about Social Security options. Delaying benefits until age 70 will increase total payout; might reduce longevity risk.
Outlining steps to take to shore up retirement income. Increasing a 401(k) contribution rate can help narrow the retirement gap. Reducing spending and increasing your savings rate are other actions.

How to Calculate Retirement Income

Knowing if your 401(k) is enough is important, but so too is a broader look at your assets and liabilities along with what income to expect in retirement. No retirement gap analysis is complete without it.

Calculating retirement income can be done using various online calculators, but you might want to sit down with a financial planner to map out what income you, personally, will need in retirement. Variables like your spending habits, inflation, discounted cash flow rates, and possible risks all must be considered.

You can also leverage the Social Security Administration’s Retirement Estimator calculator to find out what you should expect to receive when you decide to retire. While the output is just an estimate, it can go a long way toward bridging your retirement gap if you have a gauge of what income you will have in retirement.

Another way to calculate retirement income is to sum up your retirement assets, assume a contribution rate between now and retirement along with a rate of return, then take that asset base as an amount from which to draw income during retirement.

Many planners use the “4% rule”, which states that a retiree can withdraw up to 4% of their retirement account value each year without a high risk of running out of money. This is just a rule of thumb, however, and it might not work as well today as it did decades ago.

Investing for Retirement With SoFi

Identifying where you are on your retirement journey is an important part of financial planning. Doing a retirement gap analysis is an essential part of that process. As time passes, our lives and lifestyles, our goals, and often our physical health can change. All these factors can impact how much we’ll need to spend in the future.

By conducting a retirement gap analysis to identify any shortfalls in savings, it’s possible to make adjustments, and course-correct to get savings goals on track.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

What is a retirement gap?

A retirement gap is a difference in the amount you have saved for retirement versus how much you will need. A retirement gap analysis can be performed to help identify how much more you will need to save for retirement. Once you know the amount, you can then take steps to boost your savings and investment accounts so that you can retire on time.

How do I find out if I have a retirement account?

Many individuals have a 401(k) or another retirement plan through their employer. Check with your HR department to see if there is an account set up for you. You might also have retirement accounts established on your own through investment brokerage companies. Also consider that you can likely collect a monthly Social Security benefit in retirement. Be sure to check with the Social Security Administration.

Will my retirement account be enough for me?

This is a tough question, but an important one. Knowing how much you will need for retirement is crucial to developing a retirement savings strategy and living a confident retirement. You may want to meet with a financial advisor to develop a plan. You can also use online resources, tools, and calculators to help determine if your current portfolio is enough to fund your retirement.

Photo credit: iStock/MicroStockHub

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.

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.

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.

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