Jul
05
2025
Beginners Guide to KYC

What Is Know Your Customer (KYC) for Financial Institutions?

By | Growing Wealth, invest, Investing | Comments Off on What Is Know Your Customer (KYC) for Financial Institutions?

There are banking regulations in place that are known as KYC. The definition of KYC is “know your customer,” and these rules provide guidelines for financial institutions to know more about their customers.

This isn’t just a matter of curiosity but of national security and crime prevention. Banks need to protect themselves from unwittingly participating in illicit activities.

For example, if a criminal uses a bank for illicit purposes, such as money laundering, the financial institution could be held accountable. It’s the bank’s responsibility to always know who their customers are. That way, they can help avoid being involved in criminal activity.

KYC plays an important role in financial institutions maintaining accurate information about their clients. KYC procedures and anti-money laundering (AML) laws can work together to minimize risk. Read on to learn more about know your customer regulations.

Key Points

•   Know Your Customer (KYC) law requires financial institutions to verify customer identities.

•   The purpose of KYC is to help prevent money laundering, terrorism financing, and fraud.

•   The KYC process includes the Customer Identification Program, Customer Due Diligence, and Enhanced Due Diligence.

•   Under KYC, there is monitoring and annual reviews of customer activities.

•   Compliance with KYC generally enhances a financial institution’s reputation and integrity.

3 Components of KYC

There are three main parts of a KYC compliance framework, which were instituted under the USA Patriot Act in 2001: customer identification, customer due diligence, and enhanced due diligence. Each phase of the process of this kind of financial regulation gets more intensive according to the estimated risk that the potential client might pose.

Customer Identification Program (CIP)

The first of the three main KYC requirements is to identify a customer. (Incidentally, some people refer to KYC as know your client vs. know your customer.)

Organizations must verify that a potential customer’s ID is valid and doesn’t contain any inconsistencies. The person must also not be on any Office of Foreign Assets Control (OFAC) sanctions lists.

An organization also needs to know if their prospective customer is “politically exposed.” A politically exposed person (PEP), such as a public figure, is thought to be more susceptible to corruption than the average individual, and is therefore considered high-risk, requiring special attention.

As part of their AML/KYC compliance program, all financial institutions are required to keep records of their Customer Identification Program (CIP) as mandated by the Financial Crimes Enforcement Network (FinCEN).

FinCEN works under the guidance of the department of Treasury and is charged with guarding the financial system against illicit activity and money laundering.

The following information will satisfy the minimum KYC requirements for a Customer Identification Program:

•   Customer name (or name of business)

•   Address

•   Date of birth (not required for businesses)

•   Identification number

For individuals, the customer’s residential address must be validated. US Postal Office boxes are not accepted. Individuals with no physical residential address can use an Army Post Office box (APO), Fleet Post Office Box (FPO), or the residential or business street address of their next of kin.

For business banking customers, the address provided for know your customer laws can be the principal place of business, a local office, or another physical location utilized by the business.

The ID number for most individuals will be their social security number or Taxpayer Identification Number (TIN).

For business entities, the number will usually be their Employer Identification number (EIN). Foreign businesses without ID numbers can be verified by alternative government-issued documents.

Recommended: Opening a Bank Account While Living in a Foreign Country

Customer Due Diligence (CDD)

Due diligence includes:

•   Collecting all relevant information on a customer from trusted sources

•   Determining what the customer will be using financial services for

•   Maintaining ongoing surveillance of the situation to further verify that customer activity remains in line with recorded customer information.

The goal of this phase of the know your customer process is to assess the risks a potential customer might pose and assign them to one of three categories — low-, medium-, or high-risk.

Several variables — including the customer’s expected cash transactions, the type of business, source of income, and location — will help determine the customer’s risk level.

Other categories for assessing risk include the customer’s business industry, whether they use a foreign or domestic account, and their past financial history. The customer is also screened against politically exposed persons (PEP) and the Office of Foreign Assets Control’s (OFAC) sanctions lists.

Enhanced Due Diligence (EDD)

Enhanced due diligence (EDD) involves increased monitoring of customers deemed to be high-risk. This may include customers from high-risk third countries, those with political exposure, or those that have existing relationships with financial competitors.

Conducting enhanced due diligence on high-risk business entities requires identifying all beneficiaries of those entities when they open an account. Customers that are legal entities are those that have had legal documentation filed with a Secretary of State or other state office, and include:

•   Limited liability companies (LLC)

•   Corporations

•   Business trusts

•   General partnerships

•   Limited partnerships

•   Any other entity created via filing with a state office or formed under the laws of a jurisdiction outside of the US

On May 11, 2018, a new AML/KYC requirement came into effect. This change to KYC laws states that all banking and non-banking firms subject to the Bank Secrecy Act (BSA) must verify the identity of beneficiaries of legal entity customers when they open an account.

Firms must also develop risk profiles and continually monitor these customers. This must be done regardless of what risk category the customer falls into.

Due diligence is an ongoing process and requires financial institutions to constantly update customer profiles and monitor account activity.

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5 Key Steps Involved in Know Your Customer?

There are five main steps of complying with the know your customer rule, which is part of how banks are regulated. These include:

1. Customer Identification Program (CIP)

As mentioned above, the first step is to ensure that a prospective client’s ID is valid, real, and consistent. The address and other details must be checked. The applicant must be screened to be sure they are not on any OFAC sanctions list and their PEP status must be investigated.

2. Customer Due Diligence (CDD)

The next step of due diligence involves researching and vetting the customer’s intentions regarding the financial services they are seeking.

3. Enhanced Due Diligence (EDD)

Further scrutiny may determine that some applicants are considered risky. If the customer is deemed high-risk, additional ongoing screening is required to make sure activity doesn’t cross any lines.

4. Account Opening

If verification is successful and a client is eligible, the customer can open a bank account, with some clients requiring closer monitoring than others.

5. Annual Review

Once an account is opened, the institution will conduct an annual review of their activity. The higher the risk category a customer falls into, the more often their activities will be reviewed.

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4 Key Elements of a KYC Policy?

KYC compliance involves four key elements. When gathering KYC information, organizations must:

1. Identify Their Customers

In this step, the financial institution will gather information about the customer’s identity.

2. Verify That the Customer’s ID Is True and Valid

The identification documents will be checked against independent sources to make sure identity theft isn’t occurring

3. Understand Their Customer’s Source of Funding and Activities

In this step, a review of the customer’s activities and background can shed light on how likely it is that the client would do reputational damage or could commit crimes that involve money laundering or the financing of terrorism.

4. Monitor the Activities of Their Customers

Monitoring of customer activities is an ongoing process, particularly for high-risk clients. Most firms review clients based on their level of risk.

Low-risk clients might only be reviewed once every two or three years, moderate-risk clients every one to two years, while high-risk clients tend to be reviewed once a year or even once every six months.

Recommended: Guide to Keeping Your Bank Account Safe Online

Why Does KYC Matter?

KYC procedures matter because they are an important screening step. Their implementation can help verify customers and assess and minimize risk.

The KYC process provides guardrails and can help protect against such crimes as money laundering, terrorism funding, and other illegal activities.

Is KYC Successful?

KYC programs are seen as improving a financial institution’s reputation and integrity, though it can add a layer to a prospective client’s application process and banking life.

As the banking landscape evolves quickly with technological advances, banks are finding new ways to track customers and comply with protective KYC and other guidelines. For instance, the use of artificial intelligence (AI) in banking may be able to perform some of these functions.

AML vs KYC

KYC and AML are both ways that financial institutions comply with regulations designed to inhibit terrorism financing and money laundering.

•   AML is the more general practice of an institution seeking to identify and stop such activity.

•   KYC is one aspect of AML, focusing on customer identification and verification.

AML and KYC Similarities AML and KYC Differences
Designed to inhibit money laundering, including terrorism financing FKYC focuses on customer identification, while AML has a wider scope
Both are implemented by financial institutions to comply with government guidelines KYC represents one aspect of larger AML procedures

The Takeaway

KYC, or know your customer, is a regulation that helps financial institutions prevent fraud by their customers. KYC involves constant check-ups and ongoing measures to ensure customer information and account profiles are kept up-to-date.

Wherever you decide to bank, know that teams are likely to be at work, ensuring compliance with KYC regulations.

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Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What is a KYC procedure in banking?

KYC procedures in banking are regulations that involve a financial institution verifying potential clients’ identities and backgrounds and monitoring their activity if they become customers. This can be one of the ways a bank ensures that it’s not being used in criminal activity such as money laundering.

Do all banks require KYC?

Yes. FinCen, or the US Financial Crimes Enforcement Network, requires financial institutions and their customers to adhere to KYC regulations.

Why is KYC mandatory in banks?

KYC is an important measure as banks work to know their customers and make sure accounts are not being used for illegal purposes. KYC regulations are one way that the government seeks to prevent money laundering and terrorism financing.

Photo credit: iStock/Andrii Yalanskyi

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

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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.

*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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Jul
01
2025
What is a Covered Call ETF: Strategies & Benefits

Pros and Cons of a Covered Call ETF — and When to Buy

By | Growing Wealth, Investing | Comments Off on Pros and Cons of a Covered Call ETF — and When to Buy

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

A covered call ETF is an exchange-traded fund that generates potential income by writing call options on the securities the ETF holds. These actively-managed ETFs give investors the opportunity to benefit from covered call writing without having to participate in the options market directly.

Covered call ETFs allow investors to earn income in the form of options contract premiums, in addition to any other dividends, and potentially reduce portfolio volatility. One trade-off is that upside potential may be limited if call options are exercised — typically when the underlying security reaches the strike price — which could result in shares being called away from the fund.

Key Points

•   A covered call ETF uses options writing to generate income from owned equities.

•   Pros include potential for extra income and reduced volatility.

•   Cons include the possibility of limited upside and higher fees vs. index-tracking ETFs.

•   Covered call ETFs may suit income-focused investors, particularly in flat markets.

•   These ETFs typically underperform during strong bull runs due to capped gains from the covered calls.

Basics of the Covered Call Strategy

Covered calls involve buying shares of a stock and then writing call options contracts on some of those shares. A covered call is also a type of “call writing” or “writing a call option” on a security.

Other investors can then purchase the call option contract. They pay a set fee to the call writer, known as the option’s premium, for doing so. The contract gives a buyer of the option the right, but not the obligation, to buy shares at a specific price on or before a specified date (known as the expiration date).

In the case of call options, when the share price of the underlying security rises above the strike price, an option holder can choose to exercise the option, at which point the stock may be called away from the shareholder who wrote the call option.

The option holder receives shares at a cost lower than the market value. Their profits may equal the difference between the option strike price and where the stock is currently trading minus the premium paid. The higher the stock price rises before the expiry date, the greater the potential profit for the person holding the call option.

Because the writer of the covered call option receives income on the deal in the form of a premium, they typically want the stock price to stay flat, fall, or rise only slightly. If the stock rises beyond the strike price of the option, then they’ll receive the premium, but their shares may be called away. The option writer could have a gain or loss depending on the difference between the option’s exercise price and the purchase price of the stock and the premium received.

On the other hand, if the stock doesn’t reach the strike price of the option, then the writer keeps both the premium and the shares. They’re then able to repeat the process depending on market conditions.


💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

What Is a Covered Call ETF?

A covered call ETF is an actively-managed exchange-traded fund (ETF) that buys a set of stocks and writes call options on them — engaging in the call-writing process with the goal of generating income through option premiums.

By investing in a covered call ETF, investors have the opportunity to gain exposure to covered calls without directly participating in options trading on their own. The fund takes care of the covered calls for them.

The ETF covered call strategy usually involves writing short-term (under two-month expiry) calls that are out-of-the-money (OTM), meaning the security’s price is below a call option’s strike price. Using shorter-term options enables the strategy to try to benefit from rapid time decay.

Options like these also serve to create a balance between earning relatively high premium payments while increasing the odds that the contracts will expire OTM (which, for covered call writers, is a positive outcome).

Writing options OTM serves to help ensure that investors may retain exposure to some amount of the upward price potential of the underlying securities.

When to Buy a Covered Call ETF

It may be a good time to consider buying a covered call ETF when most of the securities held by the ETF are expected to trade sideways or go down slightly for some time. Some investors may find covered call ETFs appealing if they are comfortable trading off potential outsized gains during rallies for near-term income.

Covered call ETFs might also be attractive to those with lower risk tolerance looking to add some potential additional income to their portfolio without having to learn how to write and trade options.

It’s important to know, however, that the focus and performance may vary significantly between different covered call ETFs. Many track index funds, such as the S&P 500, while others may track individual stocks and different funds may employ different call trading strategies. It’s important to research performance and identify funds that align with your risk tolerance.

When Not to Buy a Covered Call ETF

A time when it’s generally not advisable to buy a covered call ETF may be when stocks are rising and making new record highs on a regular basis. This is a scenario where covered call ETFs may underperform the rest of the market.

If the underlying securities rise only slightly, and do not exceed the strike prices set for the covered calls, then these ETFs may also perform well. It’s when stocks rise to the point that the shares get called away from the fund that the fund may underperform compared to holding shares directly.

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*Customer must fund their Active Invest account with at least $50 within 45 days of opening the account. Probability of customer receiving $1,000 is 0.026%. See full terms and conditions.

Pros and Cons of a Covered Call ETF

The main benefits that come from using an ETF covered call strategy are the potential for reduced risk and increased income.

Pros of a Covered Call ETF

Covered call ETFs may appeal to investors seeking enhanced yield, reduced volatility, and more stable long-term returns, though returns may lag during strong bull markets.

Some investors view these ETFs as a way to pursue income while smoothing returns in choppy or rangebound markets. While writing covered calls may help buffer some downside, these ETFs do not eliminate loss risk, particularly during sharp drawdowns or rallies that force shares to be called away.

Cons of a Covered Call ETF

Covered call ETFs are actively managed, which means they tend to have higher expense ratios than passively managed ETFs that track an index. These ETFs may also come with opportunity cost, since writing covered calls can cap upside potential in a bull market when market prices are spiking.

Covered call ETFs also carry both market and options risk. However, the income from options premiums may help offset those costs.

The Takeaway

A covered call ETF is an actively managed exchange-traded fund that provides exposure to the possible benefits of writing call options on stocks, without investors having to participate directly in the options market. For investors looking for a simpler approach, this may be a way to see income without managing options directly. Covered call ETFs have two primary features in the potential for reduced volatility and increased income.

That’s not to say that they don’t have downsides, too. Notably, they tend to be actively-managed, which generally means they have higher associated fees. Again, all of this should be taken into consideration before integrating any type of security into an investment strategy.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.

Explore SoFi’s user-friendly options trading platform.

FAQ

Is a covered call ETF a good investment?

It depends on the investor’s goals. Covered call ETFs may be attractive to those seeking income and lower volatility, especially in flat or slightly rising markets. However, they typically underperform in strong bull markets due to capped upside.

Why would someone buy a covered call ETF?

Investors may consider covered call ETFs to generate income from option premiums without managing options themselves. These funds can also reduce volatility, making them appealing to more conservative or income-focused investors.

What is the risk of a covered call?

The main risks include limited upside if the underlying stock rises sharply and potential losses if the stock declines. While the option premium can help provide limited downside protection or partially offset losses, covered calls still carry downside risk and may underperform in bull markets.

How often do covered call ETFs pay income?

Most covered call ETFs distribute income monthly, though payment schedules vary by fund. The income comes from the premiums collected by selling call options, which may fluctuate based on market conditions and the fund’s strategy, and may come from regular dividends as well.

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Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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Jun
30
2025
What Is UCITS?

What Are UCITS Funds?

By | Growing Wealth, invest, Investing | Comments Off on What Are UCITS Funds?

UCITS, or Undertakings for Collective Investment in Transferable Securities, refers to a set of guidelines that allow pooled securities, similar to mutual funds, to be traded across borders within the European Union.

As such, UCITS is essentially a framework or directive that governs the composition and trading of UCITS funds.

UCITS funds are registered in individual EU countries and must comply with European Commission rules. Investors in the U.S. may also access these funds via authorized brokers. UCITS may be available in other regions, like Asia, as well.

Key Points

•   UCITS refers to a set of guidelines that allows a certain type of mutual fund to be traded freely across country borders within the EU.

•   UCITS funds are a type of mutual fund that complies with European Union regulations and holds securities from throughout the region.

•   The rules for UCITS funds are periodically updated, with each new version noted by a Roman numeral.

•   Although these are considered EU securities, U.S. investors can purchase these funds through an authorized broker.

•   UCITS funds are highly regulated, and investors outside the EU may face tax events when trading these funds.

What Is a UCITS Fund?

UCITS funds are a type of mutual fund that complies with European Union regulations. These securities can be traded across the borders of EU member states.

The EU launched UCITS for two primary reasons:

1.    To structure a type of security under the EU umbrella that allowed for the cross-border sale of mutual funds throughout the EU, and across other markets.

2.    To better regulate investment asset transactions among all EU member countries, giving investors inside and outside of the EU access to more tightly regulated investment funds.

Fundamentally, UCITS rules give EU regulators a powerful tool to centralize key financial services issues like types of investments allowed, asset liquidity, investment disclosures, and investor safeguards. By rolling the new rules and regulations into UCITS, EU regulators sought to make efficient and secure investment funds available to a broad swath of investors.

For investors, UCITS funds offer flexibility and security. Not only are the funds widely viewed as safe and secure owing to the level of regulation, but UCITS funds offer a diversified fund option to investors who might otherwise have to depend on single public companies for the bulk of their investment portfolios.

A Brief History of UCITS

The genesis of UCITS funds dates back to the mid-1980’s, with the rollout of the European Directive legislation, which set a new blueprint for financial markets across the continent. The new law introduced UCITS funds on an incremental basis and has been used as a way to regulate financial markets with regular updates and revisions over the past three decades.

In 2002, the EU issued a pair of new directives related to mutual fund sales — Directives 2001/107/EC and 2001/108/EC, which expanded the market for UCITS across the EU and loosened regulations on the sale of index funds in the region.

The fund initiative accelerated in 2009 and 2010, when the Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 clarified the use of UCITS in European investment markets, especially in coordination of all laws, regulations, and administrative oversight. The next year, the European Union reclassified UCITS w as investment funds regulated under Part 1 of the Law of 17 December 2010.

In recent years, “Alt UCITS” or alternative UCITS funds have grown in popularity, along with other types of alternative investments.

How Does a UCIT Fund Work?

Structurally, UCITS are built like mutual funds, with many of the same features, regulatory requirements, and marketing models.

Individual and institutional investors, who form a collective group of unit holders, put their money into a UCIT, which, in turn, owns investment securities (mostly stocks and bonds) and cash. For investors, the primary goal is to invest their money into the fund to capitalize on specific market conditions that favor the stocks or bonds that form the UCITS.

UCITS funds may provide one way for American investors to get more international diversification within their portfolios.

A professional money manager, or group of managers, run the fund, and they are singularly responsible for choosing the securities that make up the fund. The UCITS investor understands this agreement before investing in the fund, thus allowing the fund managers to choose investments on their behalf.

An investor may leave the fund at any point in time, and do so by liquidating their shares of the fund on the open market. American investors should know that the Internal Revenue Service may classify UCITS as passive foreign investment companies, which could trigger more onerous tax treatments, especially when compared to domestic mutual funds.


💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

UCITS Rules and Regulations

UCITS do have some firm regulatory and operational requirements to abide by in the European Union, as follows:

•   The fund and its management team are usually based on a tax-neutral EU country (Ireland would be a good example).

•   A UCITS fund operates under the laws mandated by the member state of its headquarters. After the fund is licensed in the EU state of origin, it can then be marketed to other EU states, and to investors around the world. The fund must provide proper legal notification to the state or nation where it wants to do business before being allowed to market the fund to investors.

•   A UCITS fund must provide proper notice to investors in the form of a Key Investor Information Document, usually located on the fund’s website. The fund must also be approved.

•   A UCITS fund must also provide a fund prospectus to investors (also normally found on the fund’s web site) and must file both annual and semiannual reports.

•   Any time a UCITS company issues, sells, or redeems fund shares, it must make pricing notification available to investors.

The Takeaway

Undertakings for Collective Investment in Transferable Securities (UCITS) is a category of investment funds primarily available in the EU, but investors in the U.S. may access these funds through authorized brokers.

UCITS may be an interesting type of investment for U.S. investors looking to diversify their portfolios. As with any investment, investors must conduct thorough due diligence on a UCITS security, which should include a review of fund holdings, past performance, management stability, fees, and tax consequences.

FAQ

What is UCITS in simple terms?

UCITS is a set of guidelines governing a type of mutual fund in the EU. It stands for: “undertaking for collective investment in transferable securities.” This means it’s a type of pooled investment, similar to a U.S. mutual fund, that invests in securities like stocks, bonds, short-term government bonds, and cash.

What is a non-UCITS fund?

A non-UCITS fund does not comply with UCITS guidelines. For example, a non-UCITS fund might not be open-ended or it might be illiquid — two primary UCITS requirements.

What are the disadvantages of UCITS?

UCITS funds may have higher costs, owing to the regulatory requirements governing securities in the EU. Also, because the UCITS standards can be restrictive, these funds may not be able to take advantage of certain market conditions. UCITS funds can also have higher tax consequences for U.S. investors.

Photo credit: iStock/kupicoo

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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

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.


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


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

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

SOIN-Q225-098

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28
2025
overhead view of businessman working, looking at business charts and graphs

How to Find the Right Fixed Index Annuity Rate for Your Needs

By | Growing Wealth, invest, Investing | Comments Off on How to Find the Right Fixed Index Annuity Rate for Your Needs

Annuities are a type of insurance contract that investors can use to fund their retirement or help meet other financial goals. When someone purchases an annuity, they pay premiums to the annuity issuer. The annuity company then makes regular payments back to the annuitant as agreed in the annuity contract.

Annuities can provide a steady stream of income in retirement, which may help support people’s investment goals. What’s important to keep in mind, however, is that rates of return generated can vary from one annuity to the next. It’s helpful to understand how to compare index annuity rates side by side to find the best one for your needs.

Key Points

•   Fixed index annuities offer a guaranteed minimum return and potential for higher returns linked to a market index.

•   Key factors affecting rates are cap rate, participation rate, and fees.

•   These annuities may help balance safety with market growth opportunities.

•   A good rate considers minimum return, cap, participation, fees, and the company’s financial health.

•   Evaluate companies by financial ratings and compare rates, fees, and terms to direct market investments.

What Is an Indexed Annuity?

An indexed annuity, or fixed index annuity, is a specific type of annuity product that can yield a minimum guaranteed rate of return along with a rate of return that’s linked to a stock market index.

For example, the annuity’s performance may be based on the performance of the S&P 500 Composite Price Index. This is a market capitalization-weighted index that represents 500 of the largest publicly traded U.S. companies.

Generally, annuities are indexed, fixed, or variable. With a fixed annuity, you’re guaranteed to earn a minimum rate of return, making them relatively safe investments. Variable annuity returns hinge on how underlying annuity investments, such as mutual funds, perform which can make them riskier. Indexed annuities strike a middle ground in terms of their risk/reward profile.

This type of annuity may be suitable to investors who seek upside potential with built-in downside protection, while enjoying the benefits of tax-deferred growth. Indexed annuities may also be favorable among investors who lean toward a passive versus active investing strategy.

What Are Fixed Index Annuity Rates?

Fixed index annuity rates are the guaranteed minimum rate of return on an annuity. Rather than tracking interest rates, the fixed index annuity rate is benchmarked against a particular index.

How Fixed Index Annuities Work

Fixed index annuities have two phases: the accumulation phase and the income phase.

Once you purchase a fixed indexed annuity, the accumulation phase begins. This is the period during which your annuity earns interest on a tax-deferred basis. The amount of money you have in the annuity, also referred to as the contract value, can fluctuate over time based on how the underlying index that the annuity tracks is performing.

Annuity returns are typically recalculated every 12 months, though the annuity contract should spell out how and when return calculations occur. It’s important to keep in mind that the contract may specify a cap rate, which represents the maximum positive rate of return an indexed annuity can earn.

The income or annuity phase is when payments are made back to you from the contract. These payments can be made periodically or be delivered in a single lump sum. Additionally, they can last for a specified time frame or for the duration of your natural life. If you’re married, indexed annuity payments can also continue to be paid to your spouse after you pass away. The annuity contract will detail the payment schedule.

For example, in the accumulation phase, an annuity might pay out a minimum of 3% with a 7% rate cap (even if the index is tracking at 11%). In the income phase, the fixed index annuity might be paid monthly starting at a predetermined date, and pay out across the lifetime of you and/or your spouse.

How Are Fixed Index Annuity Rates Set?

Broadly speaking, index annuity rates are tied to the index they track. So again, this could be an index like the S&P 500 Composite Price Index or the Nasdaq 100.

With a fixed index annuity, the annuity company guarantees a minimum interest rate alongside the interest rate generated by the underlying index.

When setting fixed index annuity rates, annuity contract providers typically use several factors to determine how much of a return is credited to the contract owner. The actual rate of return realized from an indexed annuity can depend on:

•  Cap rate

•  Participation rate

•  Margin/spread fees

•  Riders

Here’s more on how each one affects fixed index annuity rates.

Cap Rate

Cap rate represents the upper limit on returns that an annuity can earn over time. For instance, an indexed annuity that has a 3.5% cap rate would limit the returns credited to the annuity owner to that amount — even when the underlying index produces a higher rate of return. Generally, cap rates fall somewhere between 3 and 7% per year.

Participation Rate

If the index an annuity tracks goes up, the participation rate determines how much of that gain is credited to an annuity owner. For instance, if the index increases by 10% and the participation rate is 80%, an 8% return would be credited.

Margin/Spread Fees

Also referred to as an administrative fee, this fee can deduct a set percentage from index gains. An indexed annuity that realizes a 10% gain and has a 3% spread fee, for example, would yield a net credited return of 7%.

Riders

Riders can be used to enhance fixed indexed annuity benefits. For instance, you might choose to add a rider that would guarantee lifetime income payments to your spouse if you’re married. Expanding the annuity’s coverage can result in added premium costs, which may reduce credited returns.

What Is a Good Fixed Index Annuity Rate?

A “good” fixed index annuity rate is one that results in a rate of return that aligns with your objectives and needs. Index annuity rates can also vary based on the length of the contract term. Cost is also an important consideration, as indexed annuities can charge a variety of fees, including administrative fees and surrender charges, which may apply if you decide to cancel an annuity contract.

The top index annuities are the ones that offer the best combination of high rates and low fees. It’s also important to consider an annuity company’s ratings before purchasing an indexed annuity.

Is an Indexed Annuity Right for You?

Fixed index annuities can offer the potential to earn higher rates of return compared to traditional fixed annuities. At the same time, they may be less risky than a variable annuity product since they track an index rather than investing in the market directly.

Investment risk management is an important part of any strategy for growing wealth, even when you’re starting from scratch with building an investment portfolio. Indexed annuities aim to help with balancing that risk while creating an ongoing stream of income to rely on in retirement.

That said, it’s also important to consider how fixed index annuity rates compare to the rate of return one could earn by investing in the market directly. For example, you may see better returns by investing in individual stocks. That does involve taking more risk but individuals with a longer timeline until retirement generally have a broader window to recover from market downturns.

The Takeaway

A fixed index annuity offers investors a minimum guaranteed rate of return along with a rate of return that’s linked to a stock market index. While fixed indexed annuities do offer some advantages, they may not suit every investor and it’s important to research index annuity rates to find the right one.

FAQ

What is a fixed annuity?

Fixed annuities are a type of insurance contract that investors can use to fund their retirement or meet other financial goals. When someone purchases an annuity, they pay premiums to the annuity issuer, and the annuity company then makes regular payments back to the annuitant as agreed in the annuity contract.

What is an indexed annuity?

An indexed annuity, or fixed index annuity, is a specific type of annuity product that can yield a minimum guaranteed rate of return along with a rate of return that’s linked to a stock market index.

What determines fixed index annuity rates?

Annuity contract providers typically use several factors to determine how much of a return is credited to the contract owner. The actual rate of return realized from an indexed annuity can depend on the cap rate, participation rate, margin and spread fees, and riders.

About the author

Rebecca Lake

Rebecca Lake

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



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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

¹Claw Promotion: Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
S&P 500 IndexThe S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.


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

SOIN-Q225-135

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Jun
28
2025
Pros & Cons of Momentum Trading

Pros & Cons of Momentum Trading

By | Growing Wealth, invest, Investing | Comments Off on Pros & Cons of Momentum Trading

Momentum trading is a type of short-term, high-risk trading strategy that requires a lot of skill and practice. While momentum trades can be held for longer periods when trends continue, the term generally refers to trades that are held for a day or several days, on average.

Momentum traders strive to chase the market by identifying the trend in price action of a specific security and extract profit by predicting its near-term future movement.

Key Points

•   Momentum trading is a high-risk, short-term strategy that follows price trends.

•   Traders profit from trends using technical indicators, avoiding deep fundamental analysis.

•   High volatility and trading volume are typically needed for successful momentum trades.

•   Unexpected market news can abruptly change trends, leading to potential losses.

•   Higher tax rates on short-term gains can pose a disadvantage for momentum traders.

History of Momentum Trading

Momentum trading is a relatively new phenomenon. This kind of trading style has been made much more readily accessible with modern technology that makes trading easier in general.

An investor named Richard Driehaus has sometimes been referred to as “the father of momentum trading.” His strategy was at odds with the old stock market mantra of “buy low, sell high.”

Driehaus theorized that more money could be made by buying high and then selling at even higher prices. This idea aligns with the overarching theme of following a trend.

During the late 2000s as computers got faster, many different varieties of this type of trading began to spring up. Some of them were driven by computer models, sometimes trading on very small timeframes.

High-frequency trading algorithms, for example, can execute hundreds of trades per second. With this type of trading, humans don’t actually do anything beyond managing the system. It’s believed that about 90% of all trades that occur on Wall Street today are executed by high-frequency trading bots.

Momentum trading has become more popular in recent years with the advent of digital brokerage accounts. There have also been a number of new investment vehicles created that are well-suited to this style of trading, such as certain exchange-traded funds (ETFs).

Ever since the widespread elimination of many commission fees in 2019, it’s possible that even more retail investors might be inclined to try their hand at momentum trading. Transaction costs and brokerage fees were also a very big disadvantage for short-term traders, as the fees could reduce profits by a wide margin.

This type of trading attracts some people because, while the risks are high, so are the potential rewards.

How Momentum Trading Works

Looking for a good entry point when prices fall and then determining a profitable exit point when prices become overbought could be viewed as the method to momentum trading madness. Momentum trading can also involve using various short strategies to potentially profit from market downturns.

In a sense, this kind of trading is that simple. But of course, things can be much more difficult in practice. If it were easy, then everyone would do it. However, the vast majority of individuals who attempt short-term trading strategies like this typically are not successful.

With that in mind, momentum trading boils down to picking a security (such as a stock or an ETF), identifying a trend, and then executing a plan to capitalize on the trend based on the assumption that it will continue in the near-term.

There are many things that can be taken into consideration to this end. Among these are factors like volatility, volume, time, and technical indicators.

Volatility

Volatility refers to the size and frequency of price changes in a particular asset. Short-term traders tend to like stock volatility because wild market swings can create opportunities for large profits in short amounts of time. Of course, volatility also increases risk. One of the biggest indications that an asset has high risk is often that it has high volatility.

Volume

Volume represents the quantity of units of a particular asset being sold and bought during a certain period (e.g., the number of shares of a stock or ETF). Traders need assets with adequate volume to keep their trades profitable. Without enough volume, traders can fall victim to something known as slippage.

Slippage occurs when there aren’t enough shares being sold at a trader’s price point to fulfill the order all at once. A trade then winds up being executed across multiple orders, each of them being slightly lower than the last, resulting in a smaller profit overall. When volume is high enough, this won’t happen, as most orders can be filled all at once at a single price point.

Time Frame

Having a plan is part of what separates successful traders from unsuccessful ones. As discussed, momentum trading usually takes place on a short time-frame, although not always as short as some day trading strategies. While day traders might hold a position for hours or even minutes, momentum traders might hold positions for a day, several days, or longer.

Technical Indicators

Technical analysis is the art of trying to predict future price movements by analyzing charts. Charting software provides traders with a long list of tools that use different mathematical formulas to indicate how the price of an asset has performed in a specific timeframe. These tools are referred to as technical indicators.

Based on one or more of these indicators, traders try to infer what the near future holds for a security. This process is far from perfect, and technical analysis might best be described as only slightly predictive. Still, it’s an important part of a short-term trader’s arsenal. What do these indicators look like?

One of the simplest technical indicators is called the Relative Strength Index (RSI). This indicator is supposed to chart the recent strength of a stock based on closing prices during a given period.

The RSI provides a simple numerical value on a scale from 0–100. The higher the value, the more overbought a security might be, while a lower value indicates a security might be oversold. In other words, a low RSI can be a buy signal, while a high RSI can be a sell signal.

The topic of technical analysis goes far beyond the scope of what can be covered here in this article.

Advantages of Momentum Trading

The main advantage of momentum trading is that it can be profitable in a relatively short amount of time when executed correctly and consistently.

Whereas buy-and-hold investors tend to wait months, years, or even decades before seeing significant profits, successful momentum traders have the potential to turn out profits on a weekly or daily basis.

While investing for the long-term requires a good understanding of the fundamental factors that go into each investment, momentum trading tends to be focused around technical analysis of charts.

While this method of trying to predict price movements is by no means infallible, it does keep things simple. Traders are focused through a single lens rather than trying to comprehend the bigger picture.

In this sense, momentum trading may be simpler. But compared to long-term investing, short-term trading involves a lot more buying and selling, and that creates additional opportunities to make mistakes.

Disadvantages of Momentum Trading

As mentioned, there are a lot of risks involved in momentum trading. Momentum traders try to make inferences about future price movement based on the recent actions of other market participants. This can work, but it can also be thrown off balance by many factors, such as a single press release or fundamental development.

For example, imagine a momentum trader identifies a strong upward trend in a stock of a telecommunications company we will call Company A.

This imaginary trader develops a plan and begins executing it, placing a buy order at a select price point when the stock dips. The plan is to sell once the stock reaches a long-term resistance level that was established months ago, let’s say.

Our hypothetical trader has done this same trade before many times and made a nice profit each time, so she thinks this time will be no different.

But then something unexpected happens. The next trading day, when profits were to be booked on a continued rising price trend, a rival telecommunications company, Company B, issues a press release.

Company B has pulled ahead of Company A, implementing a new technology that will benefit customers greatly. As a result, investors begin selling stock in company A, expecting them to lose customers to competitors like Company B.

In this imaginary case, any trends that might have been identified using technical analysis would have been invalidated quickly. Hypothetical scenarios like this play out every day in the real markets.

Tax Implications to Know

Those interested in momentum trading or other short-term trading strategies may want to review the tax implications associated with this style of trading. It can be worth reviewing how taxes will impact an investor, since they could take a chunk of an investor’s profits.

Know that the IRS makes a distinction between traders and investors, for tax purposes, and it’s important to understand where you fall. A trader is someone considered by law to be in the investment business while an investor is someone buying and selling securities for personal gain.

The IRS also differentiates between short-term and long-term investments when evaluating capital gains and losses. In general, long-term investments are those held for a year or more, while those held for less than a year are considered short-term investments. Long-term investments may benefit from a lower tax rate, while short-term capital gains are taxed at the same rate as ordinary income.

Another rule worth understanding is the wash sale rule. While some capital losses can be taken as a tax deduction, there are certain regulations in place to stop investors from taking advantage of this benefit. The wash sale rule restricts investors from benefiting from selling a security at a loss and then buying a substantially identical security within 30 days. A wash sale occurs if you sell a security and then you (or your spouse or a corporation under your control) buy a similar security within the 30-day period following the sale.

The Takeaway

Momentum trading involves a combination of techniques that attempt to predict and take advantage of short-term market fluctuations. This skill is hard to master, requires a lot of knowledge and experience, and carries high risk. This kind of trading is not for everyone.

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).

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What is momentum trading?

Momentum trading is a high-risk, short-term trading strategy that follows price trends, and utilizes technical indicators to dictate trading decisions.

Who invented momentum trading?

An investor named Richard Driehaus has sometimes been referred to as “the father of momentum trading.” His strategy was at odds with the old stock market mantra of “buy low, sell high.”

What are the main advantages of momentum trading?

The main advantage of momentum trading is that it can be profitable in a relatively short amount of time when executed correctly and consistently. If successful, it can be used to generate returns quickly. However, participating in momentum trading involves significant risk and tax implications.

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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

¹Claw Promotion: Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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

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

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

SOIN-Q225-130

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