InvestHL Archives

Jul

2026

What Is Extrinsic Value in Options Trading?

By Mike Zaccardi, CMT, CFA | Growing Wealth, invest, Investing | Comments Off

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

Table of Contents

What Is Extrinsic Value?
Understanding Intrinsic and Extrinsic Value
How Extrinsic Value Works
Factors that Affect Extrinsic Value
Extrinsic Value Example
Extrinsic vs Intrinsic Value
Extrinsic Value and Options: Calls vs Puts
FAQ

What Is Extrinsic Value?

Extrinsic value is the difference between an option’s market price, known as the premium, and its intrinsic value.

Extrinsic value reflects factors beyond the underlying asset’s price that can influence the overall worth of an option. This value fluctuates based on the time to expiration and the volatility of the underlying asset.

Key Points

• Extrinsic value is the difference between an option’s market price and intrinsic value, influenced by time and volatility.

• Longer contracts and higher implied volatility increase extrinsic value.

• Interest rates and dividends affect extrinsic value differently for call and put options.

• Extrinsic value cannot be negative; it represents the portion of an option’s price that exceeds its intrinsic value.

• At-the-money options generally have the most extrinsic value due to sensitivity to time and volatility changes.

Understanding Intrinsic and Extrinsic Value

The intrinsic value of an option is the difference between an option’s strike price and the current price of the underlying asset, which can be calculated only when the underlying asset is in the money. An out-of-the-money option has no intrinsic value.

An option that is “in the money” would be profitable for the owner if exercised today, while an option that is “out of the money” would not.

An out-of-the-money option may present an investment opportunity for some, however, because of its potential to become in-the-money at expiration.

Extrinsic value equals the price of the option minus the intrinsic value. As an option’s expiration approaches, extrinsic value usually diminishes since there is less time for the price of the underlying asset to potentially move in a way that benefits the option holder (also known as time decay).

For example, an option that has two weeks before expiry typically has a higher extrinsic value than one that’s one week away. This does not imply it has more intrinsic value, however. It just means there is more time for it to move up or down in price.

Out-of-the-money option premiums consist entirely of extrinsic value, while in-the-money options have both intrinsic value and extrinsic value. Options that trade at-the-money might have a substantial proportion of extrinsic value if there is a long time until expiration and if volatility is high.

How Extrinsic Value Works

The more time until expiration and the more a share price can fluctuate, the greater an option’s extrinsic value. Extrinsic value demonstrates the time that remains for potential price movement, and the uncertainty in that movement. There are a few different factors that could influence extrinsic value, and understanding them is crucial for evaluating an option’s pricing.

Factors that Affect Extrinsic Value

Two key factors affect an option’s extrinsic value: contract length and implied volatility. In general, the longer the contract, the greater the extrinsic value of an option. That’s because the more time allowed until expiration, the more a stock price might move in favor of the option’s holder. It’s possible, however, that the price moves in the opposite direction; if the holder keeps the option in the hope that the price will rebound, they may lose some or all of their investment.

The second factor that determines extrinsic value is implied volatility. Implied volatility measures the expected magnitude of how much a stock might move over a specific period. Volatility impacts an option’s extrinsic value, and its sensitivity is represented by the Greek letter vega.

1. Length of Contract

An option contract generally has less value the closer it is to expiration. The logic is that there is less time for the underlying security to move in the direction of the option holder’s benefit. As the time to expiration shortens, the extrinsic value decreases, all else equal.

To manage this risk, many investors use the options trading strategy of buying options with varying contract lengths. As opposed to standard option contracts, a trader might choose to buy or sell weekly options, which usually feature shorter contract lengths.

On the opposite side of the spectrum, Long-Term Equity Anticipation Securities (LEAPS) sometimes have contract lengths that measure in years. Extrinsic value could be a large piece of the premium of a LEAPS option.

Some traders will also use a bull call spread, in order to reduce the impact of time decay (and the loss of extrinsic value) on their options. This rate of decay is measured by theta and tends to accelerate as expiration approaches, working in favor of the option seller.

Recommended: A Beginner’s Guide to Options Trading

2. Implied Volatility

Implied volatility measures how much analysts expect an asset’s price to move during a set period. In general, higher implied volatility means more expensive options, due to higher extrinsic value. That’s because there is a greater chance a stock price could significantly move in the favor of the owner by expiration (or out of favor if the markets shift in the opposite direction). High volatility gives an out-of-the-money option holder more hope that their position will go in-the-money.

So, if implied volatility rises from 20% to 50%, for example, an option holder may benefit from higher extrinsic value (all other variables held constant). On the flip side, an out-of-the-money option on a stock with extremely low implied volatility may have a lower chance of ever turning in-the-money.

3. Other Factors

There is more than just the length of the contract and implied volatility that affect the premium of an option, however.

• Interest rates: Even changes in interest rates, or rho, impact an option’s value. A higher risk-free interest rate increases call options’ extrinsic value, while put options have a negative correlation to interest rates.

• Dividends: A stock’s dividend may decrease the extrinsic value of its call options while increasing the extrinsic value of its put options.

• Delta: An option’s delta defines how much its price moves relative to the underlying asset. Options with lower delta tend to be further out-of-the-money and carry higher extrinsic value. Options with higher delta are in-the-money and may have more intrinsic value.

Extrinsic Value Example

Let’s say a trader bought a call option through their brokerage account on shares of XYZ stock. The premium paid is $10 and the underlying stock price is $100. The strike price is $110 with an expiration date in three months. Also assume there is a company earnings report due out in the next month.

Since the share price is below the call’s strike, the option is out-of-the-money. The option has no intrinsic value because it is out-of-the-money. Thus, the entire $10 option premium represents extrinsic value, or time value.

As expiration draws nearer, the time value declines, also known as time decay, as mentioned above. A trader who takes the long position with a call option hopes the underlying asset appreciates by expiration.

An increase in volatility, perhaps due to the earnings report or another catalyst, might push the option’s price higher. Let’s assume the stock has risen to $120 per share following strong quarterly earnings results, and the call option trades at $11 immediately before expiration.

The call option’s intrinsic value is now $10, but the extrinsic value has declined to just $1, in this scenario, since there is little time to expiration and the earnings date volatility-driver has come and gone. In this case, the trader can sell the call for a potential small profit (depending on fees involved) or they might choose to exercise the option.

Note that if the stock price had instead fallen below the strike price of $110, the call option would have expired worthless and the trader would have lost the premium they paid for the option.

Extrinsic vs Intrinsic Value

Extrinsic value reflects the length of the contract plus implied volatility, while intrinsic value is the difference between the price of the stock and the option’s strike when the option is in the money.

Extrinsic Value Factors (Call Option)	Intrinsic Value Factor (Call Option)
Length of Contract	Stock Price Minus Strike Price
Implied Volatility

Extrinsic Value and Options: Calls vs Puts

Both call options and put options can have extrinsic value.

Calls

Extrinsic value for call options has the potential to be high. Consider that a stock price has no upper limit, so call options have theoretically unlimited potential extrinsic value. The more time until expiration and the greater the implied volatility, the more extrinsic value a call option may have.

Puts

Put options have a lower potential extrinsic value since a stock price can only drop to zero. Thus, there is a limit to how much a put option can be worth, which is the difference between the strike price and zero. Out-of-the-money puts, when the stock price is above the strike, feature a premium entirely of extrinsic value.

The Takeaway

Understanding the fundamentals of intrinsic and extrinsic value is important for options traders. Although intrinsic value is a somewhat simple calculation, extrinsic value takes a few more factors into consideration — specifically time and volatility of the underlying asset. The more time until the contract expires, and the more a share price can fluctuate, the greater an option’s extrinsic value.

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

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

Explore SoFi’s user-friendly options trading platform.

FAQ

Which options have the most extrinsic value?

At-the-money options typically have the most extrinsic value since their price is closest to the strike price, thus being most sensitive to changes in time and volatility. This sensitivity means extrinsic value decays faster for at-the-money options as expiration approaches than for those deeper in or out of the money.

Can an option’s extrinsic value be negative?

No. Extrinsic value represents the portion of an option’s price beyond its intrinsic value, so it can never be less than zero. If an option’s market price is lower than its intrinsic value, it can only be as low as zero.

What is a good extrinsic value to look for?

There is no universal benchmark for what constitutes a good extrinsic value, as the right one depends on a trader’s strategy, risk tolerance, and market conditions. Options buyers may seek out lower extrinsic value to reduce premium costs, whereas options sellers may prefer higher extrinsic value to maximize the premium they collect. Time to expiration and implied volatility are the primary drivers, so both factors are worth weighing when evaluating a contract.

What is intrinsic value and extrinsic value in options?

Intrinsic value is the difference between an option’s strike price and the current price of the underlying asset, which only exists when an option is in the money. Extrinsic value is the remainder of an option’s premium beyond its intrinsic value, reflecting factors such as time to expiration and implied volatility. Together, the two components make up an option’s total premium.

Photo credit: iStock/alvarez

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

SOIN-Q226-114

Jul

2026

Growth Savings Accounts: What They Are and How They Work

By Jacqueline DeMarco | Financial Independence, invest, Life & Career | Comments Off

Table of Contents

What Is a Growth Savings Account?
How Do Growth Savings Accounts Work?
Pros of a Growth Savings Account
Cons of a Growth Savings Account
Choosing a Growth Savings Account
How to Open a Growth Savings Account
FAQ

The term growth savings account or grow savings account generally refers to a savings account that earns more than the average interest rate for a savings account. This allows your money to grow faster, just for sitting in the bank.

But are these accounts always a good bet? Important points to consider are:

• What is a growth savings account?

• How do growth savings accounts work?

• The pros and cons of a growth savings account

• How to open a growth savings account

Key Points

• Growth savings accounts, also known as high-yield savings accounts, function the same way as a traditional savings account but pay a notably higher interest rate.

• When choosing a growth savings account, compare the interest rate, minimum balance requirements, fees, account features, and other products and services offered by the financial institution.

• Advantages of growth savings accounts include liquidity and higher interest rates.

• Disadvantages of growth savings accounts include tax implications, possible withdrawal limits, and lower long-term growth than with investments such as stocks.

• Growth savings accounts are suitable for emergency funds and short-term financial goals.

What Is a Growth Savings Account?

Growth savings accounts are similar to regular savings accounts, except that they tend to pay a higher annual percentage yield (APY), which represents how much an account holder will earn in interest over the course of a year.

More commonly referred to as a high-yield savings account, these accounts can pay up to 15 times more than the average APY for a savings account, while helping keep those funds safe and accessible.

You may get a better interest rate on a growth savings account at an online bank or credit union versus a traditional brick-and-mortar bank. However, even at their best, the APYs on these savings accounts generally lag behind what you could earn by investing in the market over time. That makes growth savings accounts best-suited for your emergency fund and money that you’re saving for a short-term goal, such as a vacation or a large purchase.

How Do Growth Savings Accounts Work?

Growth savings accounts work in the same way as regular savings accounts. You open the account at a bank or credit union, deposit money into the account, and begin to earn interest on your balance. You can continue adding money to the account, either by making a deposit at a branch or ATM, transferring money from a linked account, or via mobile check deposit or direct deposit.

Savings accounts are typically insured up to $250,000 per depositor, per account ownership category, per insured bank by the Federal Deposit Insurance Corporation (FDIC) at banks and by the National Credit Union Administration (NCUA) at credit unions. So you can’t lose your money (up to certain limits) even if the bank were to go out of business.

Savings accounts allow easy access to your money when you need it, though some institutions may limit the number of withdrawals or transfers you can make to six or nine per month.

Recommended: How High-Yield Savings Accounts Work

Pros of a Growth Savings Account

Here’s a look at some of the advantages that come with opening a growth or high-yield savings account.

Higher Interest Rates

Because these savings accounts can offer higher interest rates, the money held in the account tends to grow faster than money held in traditional savings accounts. When determining what is a good interest rate, it’s a good idea to also look into minimum balance requirements. You may see that you need to keep your balance above a certain threshold to earn the highest available rate.

Accessible Form of Growth

Putting money in a savings account can be a great way to earn interest while keeping that money liquid, meaning you can access it as soon as you need it. You don’t need to sell off investments or wait until a particular maturity date to withdraw the money.

Recommended: CDs vs Savings Accounts Compared

Good Way to Build an Emergency Fund

Because these funds are fairly accessible, a growth savings account can be a great place to build an emergency fund. That way, the emergency fund can continue to grow until it might be needed.

Cons of a Growth Savings Account

There are also some downsides to growth savings accounts worth keeping in mind before opening one.

Limited Growth Opportunity

Yes, growth savings accounts typically earn more interest than traditional savings accounts. However, when considering your long-term savings options, there may be more strategic investments that can enhance growth over time. If, for instance, you’re saving for retirement, which is a few decades away, you might take a look at the stock market for growth.

Withdrawal Limits

Growth savings accounts generally provide easier access to funds than keeping money in investments. That said, you may only be able to make a certain number of withdrawals or transfers per month (such as six or nine) or risk running into fees. While the Federal Reserve withdrew this rule in 2020, banks are allowed to continue imposing those limits, so it’s a good idea to check.

Earnings Are Taxable Income

The interest earned in a growth savings account can count as taxable income. By contrast, the money you put into a Roth Individual Retirement Account (IRA) grows tax-free.

Pros of Growth Savings Accounts	Cons of Growth Savings Accounts
Higher interest rates	Possible withdrawal limits
Good way to build an emergency fund	Limited growth opportunity
Accessible form of growth	Earnings are taxable income

Choosing a Growth Savings Account

When you’re looking for ways to earn more interest on your money, a growth or high-yield savings account might be a good option. It’s a good idea to shop around to find the best fit for your needs. Here are a few factors to keep in mind when looking for a new savings account:

• APYs

• Minimum balance requirements

• Fees

• Account features

• Mobile app

• Other product and service offerings

How to Open a Growth Savings Account

While each banking institution will have its own process, opening a growth savings account typically includes the following steps:

• Fill out the application. When filling out a savings account application, you’ll usually provide details such as your name, Social Security number, proof of address (say, from a utility bill), and government-issued photo ID.

• Choose the account type. There may be different savings account types, such as an individual account or a joint account (to share with a spouse or family member). Select the kind that’s right for your needs.

• Designate beneficiaries. It’s important to choose a beneficiary for your growth savings account, just as you might select a beneficiary for a 401(k) plan. This is the person who would receive the account’s funds if you were to become incapacitated or pass away.

• Deposit funds. Some banks require a minimum initial deposit, so you may need to make that deposit to open the account.

• Create login information. To set up your online account, you’ll need to create login information such as a username and password. Be sure to create a unique and complex password with at least one capital letter, number, and symbol.

While there may be another step or two in some situations, that’s how to open a bank account.

The Takeaway

Growth savings accounts generally offer higher interest rates than traditional savings accounts, which can help your money grow faster. In some cases, however, these accounts may come with monthly fees and/or require you to maintain a certain minimum balance to earn the higher rate, so it pays to shop around.

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

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

How do growth savings accounts work?

Growth savings accounts function similarly to traditional savings accounts. The only difference between these account types is that growth savings accounts tend to have higher interest rates.

What does “growth account” mean?

A growth account, also known as a high-yield account, typically offers a higher interest rate than a traditional savings account. This higher interest rate leads to more growth on deposited funds.

How much interest does a growth savings account earn?

These days, a growth or high-yield savings account can earn as much as 4.10% APY. Be sure to compare rates at different banks before opening your account.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

Photo credit: iStock/Eoneren

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

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See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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SOBNK-Q226-121

Jul

2026

A person’s hand holding a globe in front of a blue background.

What Is the SWIFT Banking System?

By Michael Flannelly | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is SWIFT?
History of SWIFT
Who Controls SWIFT?
The Future of SWIFT
FAQ

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a secure communication network for financial institutions 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 on transaction and payment terms.

🛈 Currently, SoFi does not support SWIFT, BIC, or IBAN codes.

Key Points

• SWIFT is a messaging network that allows banks and other financial institutions to communicate securely when making cross-border payments and transfers between international bank accounts.

• The system uses a standardized system of codes to transmit information between banks during transactions.

• Each 8- or 11-character code is unique and identifies the bank, country, city, and branch.

• SWIFT was developed in 1973 to replace the human error-prone Telex system.

• Based in Belgium, SWIFT is governed by a board of directors and overseen by the G10 countries’ central banks.

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 with 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.

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 transferring money.

Since SWIFT doesn’t send money, it requires banks to take additional steps to transfer funds 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.

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 (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)

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, allowing millions of people worldwide to safely make international payments without worry. 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 G10 countries’ central banks (Bank of Canada, Deutsche Bundesbank, Banque de France, Banca d’Italia, Bank of Japan, National Bank of Belgium, De Nederlandsche Bank, Sveriges Riksbank, Swiss National Bank, Bank of England, US Federal Reserve System).

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 weapons program. Additionally, in early 2022, several Russian institutions were kicked off 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 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, such as blockchain technology, break through 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.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

Which US banks use SWIFT?

Most major U.S. banks use the SWIFT network to facilitate international payments. While some smaller local credit unions or banks may not be part of the SWIFT system, they usually route international payments through larger intermediary banks.

How does SWIFT banking work?

SWIFT is a secure, global messaging network used by over 11,000 financial institutions across 200 countries. It does not physically move money but rather acts as a standardized communications system that instructs banks on how and where to transfer funds internationally.

Is SWIFT the same as a routing number?

No, a routing number and a SWIFT code are not the same thing. A routing number is a 9-digit numerical code used exclusively for domestic transfers. A SWIFT code is an 8- to 11-character alphanumeric code used for international payments and transfers to identify a specific bank anywhere in the world.

Are SWIFT payments safe?

Yes, SWIFT employs strict security measures, including rigorous encryption, institutional vetting, and message verification, making payments highly secure. However, due to the system’s reliance on human interaction, the primary risks usually involve data-entry errors or scams rather than system failures.

How long does a SWIFT payment take?

Typically, a SWIFT payment takes one to five business days to arrive. The exact time it takes will depend on the currencies, time zones, and how many intermediary banks are required to make the transfer.

Photo credit: iStock/Evgeniy Skripnichenko

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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¹SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.
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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.
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SOBNK-Q226-068

Jul

2026

A green highway sign points to a “retirement” exit.

Guide to Investing in Emerging Markets

By Mike Zaccardi, CMT, CFA | invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

Understanding Emerging Markets
Why Invest in Emerging Markets?
Can You Build a Retirement Portfolio With Emerging Markets?
Pros of Investing in Emerging Markets
Cons of Investing in Emerging Markets
FAQ

Emerging market investments include owning shares in companies from countries like China, India, Brazil, and South Africa, among others. There are pros and cons to owning emerging market investments, but these stocks are a significant part of the global market.

Investing in emerging markets can help diversify your portfolio, which is one of the reasons that some investors do it. There are, however, risks associated with investing in emerging markets that investors should be aware of.

Key Points

• Emerging markets are economies in transition between developing and developed stages, including countries like China, India, Brazil, and South Korea, and represent approximately 30% of the global market capitalization.

• Investing in emerging markets can offer potential portfolio diversification benefits, since international stocks may outperform U.S. equities during domestic bear markets, potentially helping offset the ebbs and flows of the domestic market.

• Emerging market investments can carry significant risks including political instability, currency fluctuations, economic volatility, and potential underperformance, as demonstrated during the 1998 “Asian Contagion” global market decline.

• China represents a large portion of many emerging market index funds, creating concentrated single-country exposure in an economy with considerable political and economic uncertainty under one-party government control.

• Younger investors with longer time horizons may tolerate higher emerging market allocations, but exposure should be gradually reduced as retirement nears to manage the inherent volatility of these investments.

Understanding Emerging Markets

Investing in emerging markets, or even if you plan to open an IRA or retirement account and use it to add foreign stocks to your portfolio, may prove to be a part of a successful investment strategy. If, that is, you understand what you’re investing in.

Emerging markets are economies that are in the middle between the developing and developed stages. Emerging markets risk can be high since these areas often see rapid growth and high volatility with booms and busts. Some of the most well-known and biggest countries that investors may look to invest in include China, India, Brazil, and South Korea.

Emerging market investments are generally seen as a higher-risk area of the global stock market. Volatility can spike during periods of political upheaval and when emerging market recessions strike.

Why Invest in Emerging Markets?

Emerging market investments have been popular for decades. It became easy to own a broad emerging market index fund within an investment portfolio in the early, when exchange-traded funds (ETFs) gained popularity.

The decade of the 2000s featured strong outperformance from the high-risk, high-reward profile of emerging market investments. But volatility in these markets has also been a factor.

Some people might like to invest in areas of the stock market that exhibit rapid growth potential along with having the potential for diversification. High economic growth rates, such as those in China and India, often attract investors seeking to benefit from stocks of those nations. Indeed, there can be periods like the 2000s when strong bull markets take place.

Can You Build a Retirement Portfolio With Emerging Markets?

It’s possible to build a segment of a retirement portfolio by investing in emerging markets. Also consider that emerging market bonds are a growing piece of the global fixed-income market.

In addition, owning emerging market investments in retirement accounts is possible via ETFs and both active and passive mutual funds. Moreover, many 401(k) plans offer an emerging markets fund, too.

When thinking about investing in emerging markets, keep in mind that emerging market stocks comprise a fraction of the overall market. Emerging markets stocks represent around 30% of the global stock market’s capitalization.

Pros of Investing in Emerging Markets

There are many pros and cons of investing in emerging markets. When you start saving for retirement, it may be a good time to think about investing in emerging market stocks, since you’d likely have a relatively long time horizon to weather volatility.

Here are some of the pros of investing in emerging markets.

Opportunity to Generate Returns

Investing in emerging markets may present the opportunity to generate returns in your portfolio, although it does assume risks, too.

Also consider that more than 6.9 billion people live in emerging market countries, while just around 30% of the global stock market is weighted to them. Investing for retirement could have at least some exposure to this area for risk-tolerant individuals.

Diversification Benefits

International investments can help offset the ebbs and flows of U.S. stocks through diversification. Consider that the domestic equity market is a majority of the global market. So if the U.S. goes into a bear market, foreign shares might outperform. Retirement investing should have a diversified approach.

Cons of Investing in Emerging Markets

Emerging markets can be volatile, and they expose investors to a host of risk factors. Political, economic, and currency risks can all hamper emerging market investments’ growth.

Due to the many risks, it’s common for retirement investors to tone down their stock allocation as they approach retirement. Here are some potential downsides to investing in emerging markets.

Potential Underperformance

Emerging market stocks have underperformed in recent years for a host of factors, such as the global pandemic, and military conflicts in places such as Europe and the Middle East. So, it’s important to consider that these stocks could underperform domestic stocks in the future as well.

Correlations Might Be Changing

Some argue that emerging markets today have more correlation to other markets, so having exposure might simply expose someone to the risks and not the benefits.

High Volatility

Investors of all experience levels might want to steer away from the boom-and-bust nature of emerging markets. The process of evolving from an emerging market to a developed market is usually fraught with risk. In some areas, political turmoil might cascade into a full-blown economic recession.

Emerging market fixed-income investors can also suffer when high-risk currency values fall during such periods of volatility. Back in 1998, the “Asian Contagion” was an emerging markets-led debacle that caused a big decline in markets across the globe.

Uncertainty in China

China is now the biggest weighting in many emerging market indexes, up to one-third in some funds. That can be a lot in just one country, particularly in one as uncertain as China, given its one-party controlled economy.

The Takeaway

Building a retirement portfolio often includes owning many areas of the global stock market. Emerging market investments can play a pivotal role to ensure your allocation has higher growth potential, but you should be mindful of the risks.

It’s possible to invest in emerging markets through a variety of means, including through a retirement account, such as an IRA. But keep the risks in mind, along with your overall investment goals and time horizon.

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

Help build your nest egg with a SoFi IRA.

FAQ

Is it worth investing in emerging markets?

Strong growth potential and diversification benefits are reasons to own emerging markets for your retirement portfolio. That said, emerging markets are a small part of the global stock market. A diversified retirement portfolio could include this slice of the market, but investors also must recognize the risks. There are periods during which emerging market investments can underperform the U.S. stock market.

What is the best emerging market to invest in?

When figuring out emerging markets, you might be curious which one is the best. It is hard to say there is one in particular. Emerging market risk can be high, so to help mitigate that, owning the entire basket can help ensure the benefits of diversification.

Should my entire retirement portfolio be in emerging markets?

Building a retirement portfolio with emerging markets is common but putting all your eggs in the emerging market basket might not be the wisest move. Young investors can perhaps own a larger weight in this volatile equity area, but older investors should think about winding down their emerging markets stock exposure as they near retirement.

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Options involve substantial risk of loss and the possibility an investor may lose the entire amount invested. Before starting options trading, investors should be familiar with the Characteristics and Risks of Standardized Options . TTax implications with options should be considered. Consult your tax advisor to understand any impacts to your taxes.

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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Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.

SOIN-Q226-235

Jul

2026

A person writes down notes in a notepad with a cup and laptop.

Nonfarm Payroll: What It Is and Its Effect On the Markets

By Brian O'Connell | Financial Independence, invest, Terminology | Comments Off

Table of Contents

What Are Nonfarm Payrolls?
The U.S. Nonfarm Payroll Report, Explained
4 Figures From the NFP Report to Pay Attention To
How Does NFP Affect the Markets?
How to Trade the Nonfarm Payroll Report
FAQ

The nonfarm payroll report measures the number of jobs added or lost in the United States. The report is released by the Bureau of Labor Statistics (BLS), usually on the first Friday of every month, and is closely watched by economists, market analysts, and traders. The nonfarm payroll report can have a significant impact on financial markets. A strong or weak jobs report may lead to stock market volatility, as investors feel confident or pessimistic about the direction of the economy.

The nonfarm payroll report is just one of many economic indicators that investors can use to gauge the economy’s strength. However, market participants often pay attention because it provides a monthly snapshot of the U.S. economy’s health.

Key Points

• The nonfarm payroll report, released by the Bureau of Labor Statistics on the first Friday of each month, estimates the number of U.S. jobs added or lost, excluding farm workers, certain government employees, and nonprofit workers.

• The report consists of two surveys: the Establishment Survey, which tracks job additions by industry and average wages, and the Household Survey, which breaks down employment data by race, gender, education, and age.

• Four key figures investors monitor in the report include the unemployment rate, employment sector activity, average hourly wages, and any revisions to previously reported nonfarm payroll numbers.

• A strong jobs report may signal economic growth and rising stock prices, but can also prompt the Federal Reserve to raise interest rates, which could conversely cause stocks to decline.

• Active investors may adjust their portfolios based on the report’s expectations, adding stocks ahead of positive reports or shifting to bonds ahead of negative ones, while long-term investors may not react to every release.

What Are Nonfarm Payrolls?

Nonfarm payrolls are a key economic indicator that measures the number of Americans employed in the United States, excluding farm workers and some other U.S. workers, including certain government employees, private household employees, and non-profit organization workers.

Also known as simply “the jobs report,” the nonfarm payrolls report looks at the jobs gained and lost during the previous month. This monthly data release provides investors with a snapshot of the health of the labor market, and the economy as a whole.

The U.S. Nonfarm Payroll Report, Explained

The nonfarm payroll report is one of two surveys conducted by the BLS that tracks U.S. employment in a data release known as the Employment Situation report. These two surveys are the Establishment Survey and the Household Survey.

• The Establishment Survey. This survey provides details on nonfarm payroll employment, tracking the number of job additions by industry, the average number of hours worked, and average hourly earnings. This survey is the basis for the reported total nonfarm payrolls added each month.

• The Household Survey. This survey breaks down the employment numbers on a demographic basis, studying the jobs rate by race, gender, education, and age. This survey is the basis for the monthly unemployment rate reported each month.

When Is the NFP Released?

The Bureau of Labor Statistics usually releases the nonfarm payrolls report on the first Friday of every month at 8:30 am ET. The BLS releases the Establishment Survey and Household Survey together as the Employment Situation report, which covers the labor market of the previous month.

4 Figures From the NFP Report to Pay Attention To

Investors who are actively investing in stocks may look at several specific figures within the jobs report to help inform their investment decisions:

1. The Unemployment Rate

The unemployment rate is critical in assessing the economic health of the U.S., and it’s a factor in the Federal Reserve’s assessment of the nation’s labor market and the potential for a future recession. A rising unemployment rate could result in economic policy adjustments, like changes in interest rates that impact stocks, both domestically and globally.

Higher-than-expected unemployment could push investors away from stocks and toward assets that they consider more safe, such as Treasuries, potentially triggering a decline in the stock market.

2. Employment Sector Activity

The nonfarm payroll report also examines employment activity in specific business sectors like construction, manufacturing, or healthcare. Any significant rise or fall in sector employment can impact financial market investment decisions on a sector-by-sector basis.

3. Average Hourly Wages

Investors may consider average hourly pay a barometer of overall U.S. economic health. Rising wages may indicate stronger consumer confidence and a more robust economy. That scenario could lead to a rising stock market. However, increased average hourly wages may also signify future inflation, which could cause investors to sell stocks as they anticipate interest rate hikes by the Federal Reserve.

4. Revisions in the Nonfarm Payroll Report

Nonfarm payroll figures, like most economic data, are dynamic in nature and change all the time. Thus, investors watch any revisions to previous nonfarm payroll reports to reevaluate their own portfolios based on changing employment numbers.

How Does NFP Affect the Markets?

Nonfarm payrolls can affect the markets in a few ways, depending on the state of the economy and financial markets.

NFP and Stock Prices

If nonfarm payrolls are unexpectedly high or low, it can give insight into the economy’s future direction. A strong jobs report may signal that the economy is improving and that companies could be profiting, leading to higher stock prices. Conversely, a weak jobs report may signal that the economy is slowing down and that company profits may decline, resulting in lower stock prices as investors sell their positions.

NFP and Interest Rates

Moreover, nonfarm payrolls can also affect stock prices by influencing the interest rate environment. A strong jobs report may lead the Federal Reserve to raise interest rates to prevent an overheated labor market or curb inflation, leading to a decline in stock prices. Conversely, a weak jobs report may lead the Federal Reserve to keep interest rates unchanged or even lower them, creating a loose monetary policy environment that can boost stock prices.

Investors create a strategy based on how they think markets will behave in the future, so they attempt to factor their projections for jobs report numbers into the price of different types of investments. An unexpected jobs report, however, could prompt them to change their strategy. Surprise numbers can create potentially significant market movements in critical sectors like stocks, bonds, gold, and the U.S. dollar, depending on the monthly release numbers.

How to Trade the Nonfarm Payroll Report

While long-term investors typically do not need to pay attention to any single jobs report, those who take a more active investing approach may want to adjust their strategy based on new data about the economy. If you fall into the latter camp, you’ll typically want to make sure that the report is a factor you consider, though not the only factor.

You might want to look at other economic statistics and the technical and fundamental profiles of individual securities you’re planning to buy or sell. Then, you’ll want to devise a strategy that you’ll execute based on your research, your expectations about the jobs report, and whether you believe it indicates a bull or a bear market ahead.

For example, suppose you expect the nonfarm payroll report to be positive, with robust job growth. In that case, you might consider adding stocks to your portfolio, as share prices tend to rise more than other investment classes after good economic news. If you believe the nonfarm payroll report will be negative, you may consider more conservative investments like bonds or bond funds, which tend to perform better when the economy slows down.

Or, you might take a more long-term approach, taking the opportunity to buy stocks at a discount and invest while the market is down.

The Takeaway

The jobs report can be used as one of many economic indicators that investors take into account when weighing their next investment moves. The report offers a snapshot of the health of the labor market, and the economy at large. But it’s important to keep in mind that it’s only one indicator.

Markets move after nonfarm payroll reports, but long-term investors don’t have to change their portfolio after every new government data release. That said, active investors may use the jobs report as one factor in creating their investment strategy.

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

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FAQ

Is the jobs report the same as the nonfarm payroll report?

Yes, generally people are referring to the same report if they’re discussing the monthly jobs report and the nonfarm payroll report.

How often is the jobs report released?

The jobs report, or nonfarm payroll report, is released once per month, on the first Friday of each month.

When does the jobs report come out?

The jobs report is released on the first Friday of each month at 8:30 AM ET, unless that day is a holiday.

Which agency releases the jobs report?

The jobs report, or nonfarm payroll report, is released by the Bureau of Labor Statistics, or BLS, a government agency.

What does the nonfarm payroll report measure?

The nonfarm payroll report estimates the number of U.S. jobs added or lost, excluding farm workers, certain government employees, and nonprofit workers.

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

SOIN-Q226-236

What Is Extrinsic Value in Options Trading?

What Is Extrinsic Value?

Understanding Intrinsic and Extrinsic Value

How Extrinsic Value Works

Factors that Affect Extrinsic Value

1. Length of Contract

2. Implied Volatility

3. Other Factors

Extrinsic Value Example

Extrinsic vs Intrinsic Value

Extrinsic Value and Options: Calls vs Puts

Calls

Puts

The Takeaway

FAQ

Which options have the most extrinsic value?

Can an option’s extrinsic value be negative?

What is a good extrinsic value to look for?

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Growth Savings Accounts: What They Are and How They Work

What Is a Growth Savings Account?

How Do Growth Savings Accounts Work?

Pros of a Growth Savings Account

Higher Interest Rates

Increase your savings with a limited-time APY boost.*

Accessible Form of Growth

Good Way to Build an Emergency Fund

Cons of a Growth Savings Account

Limited Growth Opportunity

Withdrawal Limits

Earnings Are Taxable Income

Choosing a Growth Savings Account

How to Open a Growth Savings Account

The Takeaway

FAQ

How do growth savings accounts work?

What does “growth account” mean?

How much interest does a growth savings account earn?

What Is the SWIFT Banking System?

What Is SWIFT?

Format of BIC/SWIFT Code

History of SWIFT

Who Controls SWIFT?

The Future of SWIFT

The Takeaway

FAQ

Which US banks use SWIFT?

How does SWIFT banking work?

Is SWIFT the same as a routing number?

Are SWIFT payments safe?

How long does a SWIFT payment take?

Guide to Investing in Emerging Markets

Understanding Emerging Markets

Why Invest in Emerging Markets?

Can You Build a Retirement Portfolio With Emerging Markets?

Pros of Investing in Emerging Markets

Opportunity to Generate Returns

Diversification Benefits

Cons of Investing in Emerging Markets

Potential Underperformance

Correlations Might Be Changing

High Volatility

Uncertainty in China

The Takeaway

FAQ

Is it worth investing in emerging markets?

What is the best emerging market to invest in?

Should my entire retirement portfolio be in emerging markets?

Nonfarm Payroll: What It Is and Its Effect On the Markets

What Are Nonfarm Payrolls?

The U.S. Nonfarm Payroll Report, Explained

When Is the NFP Released?

4 Figures From the NFP Report to Pay Attention To

1. The Unemployment Rate

2. Employment Sector Activity

3. Average Hourly Wages

4. Revisions in the Nonfarm Payroll Report

How Does NFP Affect the Markets?

NFP and Stock Prices

NFP and Interest Rates

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