Feb
16
2024
Investment Tax Rules Every Investor Should Know

Investment Tax Rules Every Investor Should Know

By | Growing Wealth, invest, Investing | Comments Off on Investment Tax Rules Every Investor Should Know

Investing can feel like a steep learning curve. In addition to having a clear grasp of types of investment vehicles available and the role investments play in overall financial strategy, it’s a good idea to understand how taxes may affect your investments. Knowing tax implications of various investment vehicles and investment decisions may help an investor tailor their strategy and end up with fewer headaches at tax time.

What Is Investment Income?

Tax requirements for investments can be complicated, and it may be helpful for investors to work with a professional to see how taxes might impact a return on their investment. Doing so might also help ensure that investors aren’t overlooking anything important when it comes to their investments and taxes.

That said, it’s beneficial to enter into any discussion with some solid background information on when and how investments are taxed. Typically, investments are taxed at one or more of these three times:

•   When you sell an asset for a profit. This profit is called capital gains—the difference between what you bought an investment for and what you sold it for. Capital gains taxes are typically only triggered when you sell an asset; otherwise, any gain is an “unrealized gain” and is not taxed.

•   When you receive money from your investments. This may be in the form of dividends or interest.

•   When you have investment income that includes such things as royalties, income from rental properties, certain annuities, or from an estate or trust. This may incur a tax called the Net Investment Income Tax (NIIT).

In the following sections, we delve deeper into each of these situations that can lead to taxes on investments.

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

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Tax Rules for Different Investment Income Types

Capital Gains Taxes on Assets Sold

Capital gains are the profits an investor makes from the purchase price to the sale price of an asset. Capital gains taxes are triggered when an asset is sold (or in the case of qualified dividends, which is explained further in the next section). Any growth or loss before a sale is called an unrealized gain or loss, and is not taxed.

The opposite of a capital gain is a capital loss. This occurs when an investor sells an asset at a lower price than purchased. Why would this happen? That depends on the investor. Sometimes, an investor needs to sell an asset at a suboptimal time because they need the cash, for instance.

At other times, an investor may sell “losing” assets at the same time they sell assets that have gained as a way to minimize their overall tax bill, by using a strategy called tax-loss harvesting. This strategy allows investors to “balance” any gains by selling profits at a loss, which, according to IRS rules, may be carried over through subsequent tax years.

There are two types of capital gains, depending on how long you have held an asset:

•  Short-term capital gains. This is a tax on assets held less than a year, taxed at the investor’s ordinary income tax rate.
•  Long-term capital gains. This is a tax on assets held longer than a year, taxed at the capital-gains tax rate. This rate is lower than ordinary income tax. For the 2023 tax year, the long-term capital gains tax is $0 for individuals married and filing jointly with taxable income less than $89,250, and no more than 15% for those with taxable income up to $553,850. The long-term capital gains tax rate is 20% for those whose taxable income is more than that.

For the 2024 tax year, individuals may qualify for a 0% tax rate on long-term capital gains if their taxable income is $94,050 or less for those married and filing jointly, and no more than 15% if their taxable income is up to $583,750. Beyond that, the tax rate is 20%.

Dividend And Interest Taxes

Dividends are distributions that a corporation, S-corp, trust or other entity taxable as a corporation may pay to investors. Not all companies pay dividends, but those that do typically pay investors in cash, out of the corporation’s profits or earnings. In some cases, dividends are paid in stock or other assets.

Dividends that are part of tax-advantaged investment vehicles are not taxed. Generally, taxpayers will receive a form 1099-DIV from a corporation that paid dividends if they receive more than $10 in dividends over a tax year. All other dividends are either ordinary or qualified:

•  Ordinary dividends are taxed at the investor’s income tax rate.
•  Qualified dividends are taxed at the lower capital-gains rate.

In order for a dividend to be considered “qualified” and taxed at the capital gains rate, an investor must have held the stock for more than 60 days in the 121-day period that begins 60 days before the ex-dividend date. (Additionally, said dividends must be paid by a U.S. corporation or qualified foreign corporation, and must be an ordinary dividend, as opposed to capital gains distributions or dividends from tax-exempt organizations.)

Both ordinary dividends and interest income on investments are taxed at the investors regular income rate. Interest may come from brokerage accounts, or assets such as mutual funds and bonds. There are exceptions to interest taxes based on type of asset. For example, municipal bonds may be exempt from taxes on interest if they come from the state in which you reside.

Total Investment Income and Net Investment Income Tax (NIIT)

Net investment income tax (NIIT) is a flat 3.8% surtax levied on investment income for taxpayers above a certain income threshold. The NIIT is also called the “Medicare tax” and applies to all investment income including, but not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading of financial instruments or commodities.

NIIT applies to individuals with a modified adjusted gross income (MAGI) over $200,000 for single filers and $250,000 for married couples filing jointly. For taxpayers over the threshold, NIIT is applied to the lesser of the amount the taxpayer’s MAGI exceeds the threshold or their total net investment income.

For example, consider a couple filing jointly who makes $200,000 in wages and has a NIIT of $60,000 across all investments in a single tax year. This brings their MAGI to $260,000—$10,000 over the AGI threshold. This would mean the taxpayer would owe tax on $10,000. To calculate the exact amount of tax, the couple would take 3.8% of $10,000, or $380.

Cases of Investment Tax Exemption

Certain types of investments may be exempt from tax implications if the money is used for certain purposes. These investment vehicles are called “tax-sheltered” vehicles and apply to certain types of investments that are earmarked for certain uses, such as retirement or education.

There are two types of tax-sheltered accounts:

•  Tax-deferred accounts. These are accounts in which money is contributed pre-tax and grows tax-free, but taxes are taken out when money is withdrawn. For example, a 401(k) retirement account grows tax-free until you withdraw money, at which point it is taxed.
•  Tax-exempt accounts. These are accounts—such as a Roth 401(k) or Roth IRA, or a 529 plan—in which money can be withdrawn tax-free if the funds are taken out according to qualifications. For example, money in a Roth account is not taxed upon withdrawal in retirement.

Beyond investing in tax-sheltered accounts, investors may also choose to research or speak with a professional about tax-efficient investing strategies. These are ways to calibrate a portfolio that might help minimize taxes, build wealth, and reach key portfolio goals—such as ample savings for retirement.

The Takeaway

Dividends, interest, and gains can add up, which is why it’s important for a taxpayer to be mindful of investment taxes not only at tax time, but throughout the year. Understanding the implications of sales and keeping capital gains taxes in mind when planning sales can help investors make tax-smart decisions.

Because there are so many different rules regarding taxes, some investors find it helpful to work with a tax professional. Tax law also varies by state, and a tax professional should be able to help an investor with those taxes as well.

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

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

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.

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.

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

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

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

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 [email protected]. 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.

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Feb
13
2024
What is a Stag in the Stock Market?

What Is a Stag in the Stock Market?

By | Growing Wealth, invest, Investing | Comments Off on What Is a Stag in the Stock Market?

A stag is an investor who engages in speculative trading activity. When discussing a stag in stock market terms, you’re using a slang term to talk about day traders who buy and sell securities with a goal of reaping short-term profits.

Stags base their trading strategies around current market movements, relying on technical analysis to help them identify trends, with a focus on initial public offerings (IPOs). That sets them apart from bull and bear speculators, who take a longer view of the market when anticipating price movements.

Stag Definition

Stag isn’t an acronym for anything; instead, it’s a slang term used to describe investors who engage in short-term, speculative trading. Stags aim to benefit from short-term price movements by buying low and selling high. They can trade different types of securities and employ different strategies, either bullish or bearish, in executing trades to achieve maximum profit.

Stags and Market Speculation

To understand stag in stock market terms, it’s helpful to look at the difference between investing and speculation. Investing typically means putting money into the market in the hopes of seeing a long-term result, usually capital appreciation. For example, an investor may purchase 100 shares of a value stock in the hope that those shares will have increased in price by the time they’re ready to sell them 10, 20 or 30 years down the road.

Speculation is different. Investors who engage in market speculation, including stags, focus more on what’s happening in the short term and how they can leverage those trends when trading. Stags will generally accept a higher degree of investment risk in order to turn a profit within a fairly short time frame. They use technical analysis, rather than fundamental analysis, to help them make educated guesses about which way a security is most likely to move.

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

Is a Stag a Day Trader?

Investors who follow a day trading strategy buy and sell securities to capitalize on large or small price movements throughout the day. For example, they may buy 100 shares of XYZ stock in the morning and sell those shares in the afternoon before the trading day closes. Some day traders may buy and sell the same stock minutes or even seconds apart in order to lock in profits from fluctuating prices.

Following that line of thought, a stag could be considered to be a type of day trader. Both stags and day traders typically require a sizable amount of capital in order to execute trades aimed at making a short-term profit. They also have to be relatively savvy when it comes to using online brokerage platforms to buy and sell securities. And, of course, they have to be willing to accept the risk that goes along with engaging in speculative day trading.

The stag meaning in the stock market isn’t limited to retail investors, however. Institutional investors can also fall under the stag umbrella if they engage in speculative trading activity. Institutional day traders can work with different financial institutions such as private equity funds and hedge funds to execute speculative trades on their behalf.

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

Understanding Stag Trading Strategies

Stag investing revolves around active trading strategies and there are different approaches an investor may take in their efforts to secure short term stock profits. The goal with active trading is to beat the market’s performance whenever possible. Stag investors approach that goal by paying attention to market trends and momentum.

For example, if a security’s price is steadily trending upward a stag investor may speculate as to whether that trend will continue or whether a pullback might happen. If the security’s price drops, the investor may choose to buy shares if they believe that the price will rebound and they can sell those shares at a profit later. They can employ a similar strategy with stocks that are in decline already, if they believe that a price reversal lies ahead.

A stag investor may use a stacking strategy to maximize profits. Stack meaning in stock market terms can refer to different things but when discussing day trading, it means aligning trades to move in the same direction. Assuming the investor’s guess about a security’s price movement proves correct, this strategy could help them to multiply profits.

Stag traders may study stock trading charts in order to identify points of support and points of resistance when tracking price movements. They may be looking for signs that a stock is approaching a breakout, which could suggest a substantially higher price in the future. Stock charts can also be useful for telling a stag investor whether a security’s trading volume is moving bearish or bullish, which can hint at which way prices are likely to move in the near term.

Differences Between Stags, Bulls, and Bears

Stags, bulls, and bears are all different animals, so to speak, when it comes to trading. While stag investors focus primarily on the short term, bull and bear speculators take a longer view of the markets.

Bullish speculators are banking on a rise in stock prices over time. So they may buy securities with the expectation that they can turn around and sell them at a higher price. Bearish speculators, on the other hand, have a more pessimistic outlook in that they expect prices to drop. They may sell off short positions in stocks in anticipation of being able to buy those same securities later at a lower price.

Stag investors can act bullish or bearish in their approach to trading, depending on the overall mood of the market. They may even change from bullish to bearish and back again several times over the course of the same trading day as stock prices rise and fall. Again, that’s not unusual considering the short-term nature of stag trading versus the longer outlook assumed by bull and bear traders.

Do Stags Trade IPO Stocks?

An initial public offering, or IPO, marks the first time a company makes its shares available for trade on a public exchange. Investing in IPOs can be highly speculative, as IPO valuations don’t always align with a company’s performance once it goes public. Some highly anticipated IPOs can end up being flops while other IPOs that fly under the radar initially end up delivering better than expected results to investors.

Stag investors may buy IPO stocks if they believe there’s an opportunity to capitalize on volatility in price movements during the first day or first few days of trading. The challenge with IPO investing is that there isn’t a lengthy track record of performance for the investor to study and analyze. Since the stock hasn’t traded yet, the same technical analysis rules don’t apply.

That means stag investors who are interested in IPOs must do a certain amount of homework beforehand. Specifically, they have to study the financial statements and documents released as part of the IPO process. They also have to take the temperature of the markets to get a feel for how well the company is likely to do once it goes public before deciding what type of bet they’re going to make on that stock’s debut.

IPO Flipping

Since stags typically aren’t looking for long-term positions, it’s not unusual for them to buy IPO shares then resell them in a short period of time. For example, they may buy shares of an IPO in the morning and sell before the first day of trading ends if pricing volatility works in their favor. It’s also possible for stag traders to buy into an IPO before the company begins trading on an exchange, then sell their holdings once trading opens.

This practice is referred to as IPO flipping and it works similar to house flipping, in that the investor seeks to buy low and sell high quickly. Flipping IPO stocks isn’t an illegal practice as far as the Securities and Exchange Commission (SEC) is concerned, though it is generally frowned upon.

Brokerage platforms can enforce an IPO flipping policy that outlines what investors are and aren’t allowed to do in order to discourage this practice. For example, SoFi’s flipping policy may impose limits on future IPO investments and/or fees for traders who are identified as flippers.

Stag Trading Strategy Example

Here’s a simple example of how a stag trading strategy might work.

Say a new company is set to launch its IPO with an expected valuation of $35 per share. After studying the company’s financials and market expectations for the launch, a stag investor decides to buy 1,000 shares of the stock 10 minutes after trading opens. Within an hour of the company going public, investor demand pushes the stock’s price up to $45 per share.

At this point, the stag trader could sell and collect a $10 profit per share, less any commission fees their brokerage charges. But they have a hunch the price may climb even higher before the trading day is done so they hold onto their shares. By 3 pm the stock’s price has climbed to $52 per share, at which point the trader decides to sell.

Of course, this example could have gone the other way. It’s not uncommon for an IPO to open trading at a higher price point and drop throughout the day. If the investor’s hunch had proven wrong and the price dropped to $25 per share, they would have had to decide whether to cut their losses or carry over their position for another trading day to see if the price might turn around.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

The Takeaway

Stag trading is a term used to describe investors who engage in short-term, speculative trading, and stags aim to benefit from short-term price movements by buying low and selling high. This is common when a company issues stock through an IPO, which may allow an opening for a stag to generate quick returns.

IPO investing can be attractive if you’re hoping to get in on the ground floor of an up-and-coming company. You may also be interested in IPO flipping if you’re an active day trader. Given that this is all fairly advanced, it may be best to speak with a financial professional before trying it for yourself.

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

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

Photo credit: iStock/AleksandarGeorgiev

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

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

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

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Jan
29
2024
How to Save for Retirement at 30

How to Save for Retirement at 30

By | invest, Investing, Preparing for Retirement | Comments Off on How to Save for Retirement at 30

One of the most important things you can do in your 30s is to start prioritizing retirement savings if you haven’t done so already.

Building retirement savings at 30 is not always an easy task, even if you’re earning a higher salary. Financial responsibilities often increase at this time, but it’s important to keep retirement in mind even as you hit other milestones such as buying a house or starting a family.

To save for retirement in your 30s, you’ll need to balance your daily spending with your long-term goals. The sooner you can begin saving for retirement the better.

How to Start Saving for Retirement at 30

You can set yourself on a path to healthy retirement savings by using the following strategies. First up, putting money into a designated retirement plan.

1. Contribute to a 401(k)

Saving in tax-advantaged retirement accounts available through work, such as a 401(k), is one of the best things you can do to start saving for retirement. Your 401(k) allows you to contribute up to $23,000 a year in 2024, up from $22,500 a year in 2023. Contributions come directly from your paycheck with pre-tax dollars, which lowers your taxable income in the year you make them.

Regular, automatic contributions, coupled with the benefits of compounding returns, can help your savings grow even faster. Starting a 401(k) at 30 gives you several decades for your funds to grow over time.

Also, 401(k)s allow employers to contribute to your retirement, and many will offer matching funds as part of your compensation package. Aim to save at least as much as is required to receive your employer’s match. Work toward maxing out your 401(k) contributions, especially as your salary grows over time.

You can access the funds penalty-free once you reach age 59 ½, but you will owe taxes on the money at that time.


💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

2. Open an IRA

An IRA is a retirement account, which anyone with earned income can open. If you don’t have a 401(k) at work, opening an IRA can give you access to a tax-advantaged account to save for retirement. Even if you already have a 401(k), opening an IRA can be a good way to save even more, though you won’t get to write off your contributions.

For 2024, contribution limits to IRAs are $7,000 per year, up for $6,500 in 2023.

IRAs come in two different types: traditional and Roth IRAs. If you don’t have a 401(k), you can make contributions to traditional IRAs with pre-tax dollars. Like a 401(k), money in these accounts grows tax-deferred, and you’ll pay the taxes on it when you make withdrawals in retirement.

If you meet certain income restrictions, you may be able to contribute to a Roth IRA instead. In that case, you’ll make the contributions with after-tax dollars, but your money will grow tax-free inside the account and you do not have to pay taxes when you make withdrawals.

Recommended: Traditional vs. Roth IRA: How to Choose the Right Plan

3. Plan Your Asset Allocation

Diversification is the act of spreading your money across different asset classes. To minimize risk from a decline from one type of asset, it typically makes sense to create a diversified portfolio, including a mix of asset classes, such as stocks, bonds and other assets.

Your asset allocation refers to the proportion of each asset class that you hold. Your asset allocations will reflect your goals, risk tolerance, and time horizon. Given the relatively long period until your retirement, you might consider a relatively aggressive portfolio consisting mostly of stocks in your retirement account.

Stocks typically provide the most potential for growth, but they also fluctuate more than some other asset classes. Since you have three decades or more before you retire, you have time to ride out the natural ups and downs of the market.

Bonds, which tend to be less volatile than stocks but also offer lower returns, may balance out the riskier equity allocation. As you approach retirement, you may consider rebalancing your asset allocation to include more conservative investments to help protect the income you will need to draw upon soon.

Target-date funds are a type of mutual fund that automatically readjusts your portfolio as you near your target date, often the year in which you wish to retire.

4. Diversify within Asset Classes

Just as a portfolio with different types of assets offers some downside protection, so too, does diversification within those asset classes. If you invest the entire stock portion of your portfolio shares in just one company and share prices in that company drop, the value of your entire portfolio drops as well.

Now imagine that you own shares in 500 different companies. When one stock fares poorly, it will have a relatively small effect on the rest of your portfolio. Diversification helps limit the negative effects that any asset class, sector, or company could have on your portfolio.

You can further diversify your portfolio by including companies from different sectors and of all sizes from different parts of the globe. This same idea is true for other asset classes. For example, you could hold a mix of government and corporate bonds, and the corporate bonds could represent companies from various sectors and locations.

One way to add diversification to your portfolio is by investing in mutual funds, exchange-traded funds (ETFs), and index funds that invest in a diversified basket of stocks. For example, if you buy shares in an ETF that tracks the S&P 500 index, you’ll be investing in the 500 stocks included in that index.

5. Don’t Cash Out your 401(k) if You Get a New Job

If you’re only in your 30s, it’s likely that you’ll change jobs a couple of times or more, over the course of your career. When you change jobs, you’ll have a number of options for what to do with the 401(k) you hold with your previous employer.

One of these options is to cash out your 401(k). But this is typically not a great idea from a personal finance perspective. If you take a lump sum payment and you’re younger than 59 ½, you may not only owe income taxes on the withdrawal, but also a 10% early withdrawal penalty. What’s more, your money will no longer be working for you in a tax-advantaged account, potentially setting you back in your retirement savings goals.

A better option is to roll over your 401(k) into another tax-advantaged retirement account, such as your new employer’s plan, if they offer one, without paying income taxes. Or you can roll your 401(k) into an IRA without paying taxes. IRA accounts offer the added benefit of additional investment options, and they may have lower fees than your 401(k).

Recommended: How to Transfer Your 401(k) When Changing to a New Job

6. Protect Your Earnings with Disability Insurance

An injury or an illness that keeps you from going to work can hamper your retirement savings plan. However, disability insurance can help cover a portion of your lost income — usually between 50% and 70% — for a period of time.

Most employers offer some sort of short-term disability insurance, with a benefit period of three to six months. Some employers may offer long-term policies that cover periods of five, 10, or 20 years, or even through retirement age.

Check with your employer to see if you are covered by a disability policy and whether it provides enough coverage for your needs. If your employer’s plan falls short, or you don’t have access to one, you might consider purchasing a policy on your own.

The Takeaway

The earlier you can start saving for retirement the better. A long time horizon gives you the opportunity to take advantage of compounding growth for a longer period of time, which can help you increase the amount you’re able to save. Pay attention to the fees you’re paying on investments, which can eat away at returns over time.

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

Easily manage your retirement savings with a SoFi IRA.

Photo credit: iStock/AJ_Watt

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

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

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

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Jan
26
2024
What Is a Liquid Certificate of Deposit?

Guide to Liquid Certificates of Deposit (CDs)

By | Family Finances, Investing, money | Comments Off on Guide to Liquid Certificates of Deposit (CDs)

If you’re in search of a low-risk way to grow your money, a liquid certificate of deposit (CD) might be worth a closer look. A liquid CD gives you a fixed, guaranteed rate of interest for a specific term, but unlike standard CDs, you don’t pay a penalty if you withdraw the funds before the maturity date.

Granted, the returns you earn on a liquid CD may not compete with stock market investments, but knowing that your money is earning interest and likely won’t incur any losses can be powerful benefits.
Here, you’ll learn more about liquid CDs, including:

•   What a liquid CD is

•   How to withdraw money from a liquid CD

•   The pros and cons of liquid CDs

•   Alternatives to liquid CDs.

What Is a Liquid Certificate of Deposit?

Before you think about investing in a CD, here’s a look at definitions:

•   A certificate of deposit, or CD, is a savings vehicle that usually gives you a bit of interest with virtually no risk, provided you keep the money in place for a certain term. If, however, you withdraw funds before the CD matures (or reaches the end of its term), you are usually penalized. You will likely lose some or all of the interest earned and perhaps even a bit of the principal. In other words, are certificates of deposit liquid? Usually not.

•   A liquid certificate of deposit, on the other hand, gives you flexibility. It allows the account holder to withdraw money from their account prior to the maturity date without incurring penalties. This means you can access funds in the CD should you need them without penalty. However, the rates for liquid CDs tend to be lower than other kinds of CDs.


💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

Understanding a Liquid CD

You may be wondering, “What are liquid assets?” In the realm of finance, the concept of “liquid” means that an asset can quickly be converted to cash. A liquid CD is a time-bound deposit account where you can earn interest for a specific period of time. Compared to traditional CD’s however, liquid CDs will not charge you early withdrawal penalties. This means you can easily liquidate (turn into cash) your CD without taking a hit in terms of its value.

As noted above, there’s a “but” to this proposition, which you may hear referred to as no-penalty CDs: Liquid CDs typically pay less than traditional CDs. Depending on which financial institution you go to, these products can offer various terms, either as little as a few months or up to several years or longer. Your fixed interest rate will vary according to the length of the term you’ve chosen. Typically, the longer you hold your money in the liquid CD, the higher the rate of return.

What can be a big plus about CD rates is that they are locked in during the full term. This means even if interest rates decrease, your rate would not change. Some financial institutions may require a minimum deposit for these CDs, and they can be significantly higher than traditional CDs; some are at the $10,000 and up level. What’s more, the minimum deposit may go up if you are seeking a higher interest rate, while others don’t have a minimum deposit requirement at all.

How Do You Withdraw Money From a Liquid CD?

If you have decided that you need to withdraw from your liquid CD, here’s what usually happens:

•   Check with your bank about how long it will take to process a withdrawal and whether you need to withdraw a certain percentage at a time. (Some banks may require you to close the account entirely.)

•   When ready, notify your bank of your withdrawal.

•   You will likely have to wait about a week after opening the liquid CD before you can start withdrawing.

•   Wait for your funds. Withdrawal is likely not as quick as withdrawing funds from a checking or savings account; your financial institution might require anywhere from a week to a month to process the transaction.

Recommended: What Happens If a Direct Deposit Goes to a Closed Account?

Liquid CD: Real World Example

Once you have decided a no-penalty CD is right for you, you will need to go to a bank or credit union that offers this account. Once you’ve opened an account, you have to fund it.

How it grows will depend on the principal, your APY (annual percentage yield), and how often the CD compounds the interest, which could be, say, daily or monthly.

•   If you invested $10,000 in a liquid CD with a three-year at a rate of 5.30%, at the end of the three-year period with interest compounded monthly, you will have a total balance of about $11,719.28.

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Pros of a Liquid CD

When evaluating liquid CDs, it’s worthwhile to review the benefits of these accounts. Some of the key upsides are:

•   Liquidity. You can access and withdraw your funds prior to the term’s end. Perhaps you’re having an emergency that requires cash, or you decide to move around your money to better meet your financial goals. It’s possible!

•   No penalties. If you dip into the account before it matures, you won’t be assessed a fee.

•   Security. Liquid CDs are safe investments. These accounts are federally insured up to $250,000 per depositor, per account ownership category, per insured institution. You’ll know your money is protected when you open a liquid CD with a bank or credit union. Even in the very rare situation of a bank failure, you’re covered as noted.

•   Guaranteed returns. When you start a liquid CD account, you usually know the interest rate upfront. It may not be stratospheric, but it’s a sure thing.

Cons of a Liquid CD

Now that we’ve explored the good things about a liquid CD, we need to give equal time to the potential downsides:

•   Lower rate of return. The interest rates are significantly lower compared to certificate of deposit rates.

•   Withdrawal rules. Yes, these accounts are more accessible, but after your deposit has been in place for a week, your withdrawal guidelines may be quite specific. For instance, you may have to remove all your funds if you want to make a withdrawal, or the amount might be limited to a certain percentage that doesn’t suit your needs. Check before starting a liquid CD investment.

•   Tax implications. Earnings on your liquid CD will be taxed at your federal rate, which is something to keep in mind as that will take your return down a notch.

Recommended: How to Automate Your Personal Finances

Alternatives to a Liquid CD

If the idea of a liquid CD doesn’t sound like an appealing low-risk investment option, there are alternatives to also consider.

Traditional CDs

Traditional certificates of deposit require you to stow your money away for a certain period of time. In exchange, you receive a return at the end of that period. The catch is, you are not able to withdraw your funds during this holding period. If you have a financial emergency, for example, and need the money from your CD, you will receive penalties for withdrawing your cash before the period of maturity.

However, this might be a gamble you are willing to take, especially if you have a nice, healthy emergency fund set aside. You’ll earn a better rate of return than with a liquid CD.

Laddering

CD laddering usually involves opening CDs of different term lengths. This strategy allows you to invest long-term CDs which provide higher rates of return, while having the ability to access your funds through a shorter-term CD maturing.

Money Market Account

Another CD alternative is a money market account, which is similar to a savings account with some added benefits. Money market accounts typically require minimum balances and offer rates comparable to savings accounts, which can change over time. While the rates may be lower than a CD, money market accounts typically allow you to withdraw and transfer your money six times per month or more.

Emergency Fund

An emergency fund, or a rainy-day fund, is a savings account that should only be used in times of financial emergencies or unexpected expenses. Depending on your financial position, you can have an emergency fund in a regular savings account, money market account, CD, or liquid CD. It depends on how much you plan to access your emergency fund and how much interest you want to earn in the account.

High-Yield Savings Account

A high-yield savings account can offer a competitive rate of interest, depending on the financial institution offering it (online banks tend to pay more than traditional ones). And you’ll have more liquidity than a CD because you can deposit and withdraw from the account more frequently, though the specifics may vary with each bank. If you want easy access to your funds plus interest, a high-yield bank account may be a good option.

The Takeaway

Liquid CDs are a financial product that offers the safety and guaranteed return of a traditional CD with the bonus of not being penalized if you make an early withdrawal. For those who are comfortable locking their money into a CD but worry an emergency or other need might pop up, this accessibility can be very attractive. Worth noting: Expect lower interest rates from a liquid CD than a standard one. Alternatives to a liquid CD can include a high-yield savings account.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Are CDs liquid investments?

Traditional CDs are not liquid investments. Funds held in a CD cannot be accessed until the account term is reached. If you need to withdraw money from your CD prior to its maturity date, you will have to pay a penalty. A liquid CD, however, offers flexibility to withdraw money from your account prior to its term date without the usual fees.

What is a non-penalty CD?

A non-penalty CD, also known as a liquid CD, is a time deposit that offers interest on your money. However, the rate is usually somewhat lower than the rate for a typical CD (the kind with penalties). The longer the term you choose for your liquid CD, the more you usually can earn.

How much is the penalty for early withdrawal from a CD?

Each financial institution has its own way of calculating this, but it usually involves losing some of all of the interest you have accrued. If you have a two-year traditional CD and withdraw funds early, the fee could vary considerably; a recent search found anywhere from two months’ to a year’s’ worth of interest. If you have a liquid or no-penalty CD, you will of course avoid these fees.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

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.

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Jan
19
2024
Are There Bitcoin ETFs?

A Guide to Bitcoin ETFs

By | Growing Wealth, invest, Investing | Comments Off on A Guide to Bitcoin ETFs

What Is a Bitcoin ETF?

Bitcoin ETFs are exchange-traded funds that allow investors to gain exposure to Bitcoin without directly owning it. These ETFs include spot Bitcoin ETFs, which are designed to track the price of Bitcoin. That means when the price of Bitcoin in U.S. dollars goes up, a spot Bitcoin ETF trading on the stock exchange should also go up, and vice versa.

Spot Bitcoin ETFs were first approved by regulators in the United States in January 2024, a significant step as it opened more doors for everyday investors interested in trading crypto on a public stock exchange.

Bitcoin ETFs have a much narrower focus than most other exchange-traded funds, which started out with the aim of giving investors broad exposure to the stock market. But, like all investments, they have benefits and risks that investors should know about.

An Introduction to Bitcoin ETFs

Bitcoin ETFs are exchange-traded funds that, effectively, allow investors to gain exposure to the crypto markets as easily as they would buy or sell a stock. Bitcoin ETFs track the price or value of Bitcoin, and so the value of a Bitcoin ETF share is designed to rise or fall in relation to the change in value of the underlying cryptocurrency.

It also means that investors don’t need to directly own cryptocurrency to gain exposure to the market in their portfolio — they can invest in a security that tracks it instead. Another added benefit is the investors may sometimes be able to avoid crypto fees that some platforms and brokerages could charge for crypto transactions.

The Securities and Exchange Commission, one of the top regulation bodies in relation to the financial industry in the United States, first approved U.S.-listed Bitcoin ETFs in January 2024.

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

What Are Spot Bitcoin ETFs?

Spot Bitcoin ETFs are ETFs that trade at “spot” value – “spot” value meaning the price of the underlying asset at any given time. So, if a buyer and seller come together to make a trade, they would do so at the spot price. There are spot markets for all sorts of commodities.

Where Can Investors Buy Spot Bitcoin ETF Shares?

Investors can buy spot Bitcoin ETF shares via numerous exchanges and platforms. While previously, investors interested in Bitcoin or other cryptocurrencies would need to trade on platforms that supported cryptocurrencies, since Bitcoin ETFs are, well, ETFs, investors are likely to find them available on many other platforms — that includes SoFi, which allows investors to buy spot Bitcoin ETF shares as well.

Are There Other Spot Crypto ETFs?

Spot Bitcoin ETFs track the price of a fund’s Bitcoin holdings, and other spot crypto ETFs, if and when they are approved and hit exchanges, will do the same.

As noted, spot Bitcoin ETFs were first approved by regulators in early 2024. There are ETFs that track Bitcoin-exposed or Bitcoin-adjacent companies, too, as well as Bitcoin futures. Spot Ethereum ETFs, which may be the next type to be greenlit by regulators, are similar to spot Bitcoin ETFs, in that they track the price of Ethereum, and allow investors to gain exposure to Ethereum in their portfolios without owning it directly.

What Are Bitcoin Futures ETFs?

Bitcoin futures ETFs are another type of ETF that give investors exposure to the price movements of Bitcoin via futures contracts. Futures are a type of contract that dictates the terms of a trade at a future date, and typically have underlying assets such as precious metals or other commodities — including crypto.

Accordingly, Bitcoin futures ETFs are crypto futures ETFs that specifically track Bitcoin futures contracts. The SEC actually approved Bitcoin futures contracts in 2021, but again, investors should know that they don’t track the price or value of the underlying asset exactly — which differentiates them from spot Bitcoin ETFs.

Are There U.S.-listed Spot Bitcoin ETFs?

There are U.S.-listed spot Bitcoin ETFs. When the SEC first granted their approval in January 2024, it opened the door to several Bitcoin ETFs hitting the market. As a result, investors were able to start buying and selling them via the stock market.

The SEC’s approval led to new spot Bitcoin ETFs being listed on a few different exchanges. Here’s a list of the first 11 spot Bitcoin ETFs that gained approval from the SEC:

•   Grayscale Bitcoin Trust (GBTC)

•   Bitwise Bitcoin ETF (BITB)

•   Hashdex Bitcoin ETF (DEFI)

•   ARK 21Shares Bitcoin ETF (ARKB)

•   Invesco Galaxy Bitcoin ETF (BTCO)

•   VanEck Bitcoin Trust (HODL)

•   WisdomTree Bitcoin Fund (BTCW)

•   Fidelity Wise Origin Bitcoin Fund (FBTC)

•   Franklin Bitcoin ETF (EZBC)

•   iShares Bitcoin Trust (IBIT)

•   Valkyrie Bitcoin Fund (BRRR)

Note, too, that it’s anticipated that additional spot cryptocurrency ETFs will become available.

How Are Bitcoin ETFs Regulated?

Bitcoin ETFs are and will be regulated by the SEC, which sets out guidance in terms of legality. Regulation in the crypto space is and has been murky — it’s been largely unregulated for the entirety of the crypto space’s existence. But the advent of crypto ETFs is likely to change that to some degree, as spot Bitcoin ETFs’ underlying asset is and can be Bitcoin itself, rather than Bitcoin derivatives.

That’s another important distinction investors should note: Spot and futures Bitcoin ETFs may be regulated under slightly different terms, as futures are derivatives. Investors should pay attention to the space and to any SEC guidance released regarding crypto regulation, as it may impact the value of their holdings in crypto ETFs, too.

Pros & Cons of Bitcoin ETFs

Like all investments, there are pros and cons of ETFs — including Bitcoin ETFs.

Benefits of Bitcoin ETFs

Proponents of Bitcoin ETFs appreciate that they can give investors exposure to the complicated and volatile cryptocurrency market, without the need to personally hold actual crypto.

Convenience and Ease

Buying a spot Bitcoin ETF requires little tech know-how beyond knowing how to use a computer, open a brokerage account, and place a buy order.

ETFs provide a seemingly easy way to profit from rising asset prices without having to actually own those assets. On the other hand, holding actual Bitcoin may require a somewhat advanced level of technical expertise.

Safe Storage

Some cryptocurrency exchanges might be trustworthy, but some users have also had a controversial history of being hacked, stolen from, or defrauded. Even reliable exchanges open investors up to risk. Owning shares of a Bitcoin ETF can help avoid those risks.

Securely storing cryptocurrencies — for example, storing the private keys to a Bitcoin wallet — is most often done by using either a paper wallet that has the keys written in the form of a QR code and a long string of random characters, or by using an external piece of hardware called a hardware wallet.

Lower Counterparty Risk

Counterparty risk arises whenever a third party holds onto something for someone else. In certain situations, the third party’s interests might run contrary to that of the investor’s assets that they hold. Over the years, some service providers have sprung up promising to securely hold crypto for users. This may or may not be a desirable or promising solution, but even if it were suitable in all cases, there would still be risk.

At best, an unforeseen event like a bankruptcy or market disruption could cause a business to withhold customer funds for a period of time, making them inaccessible when people might need those assets most. Owning shares of a Bitcoin ETF, however, provides a level of protection, as those shares are regulated and in an investor’s portfolio.

Risks of Bitcoin ETFs

There are, naturally, numerous risks for investors to consider with Bitcoin ETFs, including volatility, costs, and the unpredictable and still largely-unregulated nature of the crypto market.

Volatility

The volatility comes from the occasional wild swings experienced in the price of Bitcoin against most other currencies. A Bitcoin ETF, which is intended to mimic the price action of Bitcoin, should also experience similar price swings. This could scare investors that have a lower risk tolerance, enticing them to panic sell.

Fees

One of the risks that comes from holding an ETF of any kind involves its expense ratio. This number refers to the amount of money a fund’s management charges in exchange for providing the opportunity for investors to invest in their fund.

If a fund comes with an expense ratio of 2%, for example, the fund management would take $2 out of a $100 investment each year. This figure is usually calculated after profits have been factored in, cutting into investors’ gains. In other words, some Bitcoin ETFs could be relatively expensive for investors to hold, but it’ll depend on the specific fund.

Fraud and Market Manipulation

Regulators have cited fraud and market manipulation as reasons for why they were cautious about approving a spot market Bitcoin ETF. It’s unclear how the SEC’s approval of spot Bitcoin ETFs may affect fraud and market manipulation in the crypto space, but it’s something inventors should be aware of.

The Takeaway

Spot Bitcoin ETFs were approved by the SEC in early 2024, and as a result, it’s likely that many more crypto ETFs will also hit markets and exchanges in the future — though nothing is guaranteed. These ETFs function more or less like any other type of ETF, and investors can use them to gain exposure to the crypto markets.

For investors curious about the cryptocurrency market but not yet ready to take the plunge, a Bitcoin ETF may represent a more convenient, comfortable option. It may be best to speak with a financial professional before investing, too.

If you’re ready to bring crypto into your portfolio, you can invest in a Bitcoin ETF with SoFi. Along with many other types of investments, SoFi’s platform offers investors access to the crypto space through spot Bitcoin ETFs.

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

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

FAQ

What are the options for Bitcoin ETFs?

There are Bitcoin futures ETFs, and spot Bitcoin ETFs listed in the U.S., which investors can buy. Given the SEC’s approval of Bitcoin ETFs in early 2024, there may soon be additional spot crypto ETFs available to investors in the future.

Are there U.S.-listed Bitcoin ETFs?

As of January 2024, there are U.S.-listed spot Bitcoin ETFs after the SEC approved an initial batch of them, and it’s likely there will be more in the subsequent months and years.

Where can Bitcoin ETF shares be purchased?

Crypto ETFs can be purchased and traded on the stock market, alongside other ETFs.

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

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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.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

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

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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