A clearinghouse is a financial institution that acts as a middleman between buyers and sellers in a market, ensuring that transactions take place even if one side defaults. If one side of a deal fails, a clearinghouse can step in to fill the gap, thus reducing the risk that a failure will ripple across financial markets. In order to do this, clearinghouses ask their members for “margin,” or collateral that is held to keep them safe from their own actions and the actions of other members.
While often described as the “plumbing” behind financial transactions, clearinghouses became high profile after the 2008 financial crisis, when the collapse of Lehman Brothers Holdings Inc. exposed the need for steady intermediaries in many markets. Regulations introduced by the Dodd-Frank Act demanded greater clearing requirements, turning the handful of clearinghouses in the country into some of the most systemically important entities in today’s financial system.
Key Points
• Clearinghouses act as intermediaries in financial markets, ensuring transactions complete even if a party defaults.
• Clearinghouses manage the clearing and settlement process, transferring assets and funds between parties.
• Margin requirements and default funds help provide layers of protection against financial instability.
• Clearinghouses gained prominence after the 2008 financial crisis, enhancing market stability.
• Regulators have raised concerns that clearinghouses may be too big to fail, concentrating financial risk.
How Clearinghouses Work
Clearinghouses handle the clearing and settlement for member trades. Clearing is the handling of trades after they’re agreed upon, while settlement is the actual transfer of ownership, or delivering an asset to its buyer and the funds to its seller.
Other responsibilities include recording trade data and collecting margin payments. The margin requirements are usually based on formulas that take into account factors like market volatility, the balance of buy-versus-sell orders, as well as value-at-risk, or the risk of losses from investments.
Because they handle investing risk from both parties in a trade, clearinghouses typically have a “waterfall” of potential actions in case a member defaults. Here are the layers of protection a clearinghouse has for such events:
1. Margin requirements by the member itself. If market volatility spikes or trades start to head south, clearinghouses can put in a margin call and demand more money from a member. In most cases, this response tends to cover any losses.
2. The next buffer would be the clearinghouse’s own operator capital.
3. If these aren’t enough to staunch the losses, the clearinghouse could dip into the mutual default fund made up from contributions by members. Such an action however could, in turn, cause the clearinghouse to ask members for more money, in order to replenish the collective fund.
4. Lastly, a resolution could be to try to find more capital from the clearinghouse itself again — such as from a parent company.
Are Clearinghouses “Too Big to Fail?”
Some industry observers have argued that regulations have made clearinghouses too systemically important, turning them into big concentrations of financial risk themselves.
These critics argue that because of their membership structure, the risk of default in a clearinghouse is spread across a group of market participants. And one weak member could be bad news for everyone, especially if a clearinghouse has to ask for additional money to refill the mutual default fund. Such a move could trigger a cascade of selling across markets as members try to meet the call.
Other critics have said the margin requirements and default funds at clearinghouses are too shallow, raising the risk that clearinghouses burn through their buffers and need to be bailed out by a government entity or go bankrupt, a series of events that could meanwhile throw financial markets into disarray.
Clearinghouses in Stock Trading
Stock investors may have learned the difference between a trade versus settlement date. Trades in the stock market aren’t immediate. Known as “T+2,” settlement happens two days after the trade happens, so the money and shares actually change hands two days later.
In the U.S., the Depository Trust & Clearing Corporation (DTCC) handles the majority of clearing and settling in equity trades. Owned by a financial consortium, the DTCC clears trillions in stock trades each day.
Clearinghouses in Derivatives Trading
Clearinghouses play a much more central and pivotal role in the derivatives market, since derivatives products are typically leveraged, so money is borrowed in order to make bigger bets. With leverage, the risk among counterparties in trading becomes magnified, increasing the need for an intermediary between buyers and sellers.
Prior to Dodd-Frank, the vast majority of derivatives were traded over the counter. The Act required that the world of derivatives needed to be made safer and required that most contracts be centrally cleared. With U.S. stock options trades, the Options Clearing Corp. is the biggest clearinghouse, while CME Clearing and ICE Clear U.S. are the two largest in other derivatives markets.
The Takeaway
Clearinghouses are financial intermediaries that handle the mechanics behind trades, helping to back and finalize transactions by members. But since the 2008 financial crisis, the ultimate goal of clearinghouses has been to be a stabilizing force in the marketplace. They sit in between buyers and sellers since it’s hard for one party to know exactly the risk profile and creditworthiness of the other.
For beginner investors, it can be helpful to understand this “plumbing” that allows trades to take place and helps ensure financial markets stay stable.
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FAQ
What does a clearinghouse do?
Clearinghouses handle the clearing and settlement for trades on the markets. Clearing is the handling of trades after they’re agreed upon, while settlement is the actual transfer of ownership, or delivering an asset to its buyer and the funds to its seller.
What role do clearinghouses play in the markets?
Since the financial crisis in 2008 and 2009, clearinghouses largely play a stabilizing role, while also clearing trades.
What protections help stabilize the markets as it relates to clearinghouses?
Margin requirements and default funds provide layers of protection against financial instability.
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A checking account can be a convenient place to store your cash and manage daily transactions. Among its benefits: You can usually make as many transfers in and out of the account as you like. Also, your funds are likely to be insured.
There are, however, some cons, too. You probably won’t earn much or any interest for parking your money in a checking account, and you may be hit with an array of fees that nibble away at your funds.
Here, take a closer look at checking account pros and cons so you can pick the right financial product to suit your needs.
Key Points
• A checking account provides security and easy access to funds.
• Checking accounts can support direct deposits and convenient bill payments.
• A benefit of a checking account can be a small amount of interest, plus rewards and sign-up bonuses.
• Potential drawbacks include low interest and fees.
• Alternatives to checking accounts include prepaid cards and digital payment services.
What Is a Checking Account?
Simply put, a checking account is a safe place to stash funds and enable the flow of money in (what you earn and receive) and out (what you spend).
Whether held at a brick-and-mortar bank, an online bank, or a credit union, a checking account is often the hub of a person’s financial life. Your pay can be seamlessly direct-deposited, if you like.
For your everyday spending, you might schedule automatic payments for your mortgage and utilities, write a check when paying for a doctor’s appointment, and tap your debit card when treating yourself to a wine tasting with friends on the weekend.
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Benefits of Checking Accounts
Here’s a closer look at the pros and cons of a checking account, starting with the upsides.
Security
Yes, you could stuff your money under the proverbial mattress, but with a checking account, you have a secure spot for it, where it can’t get lost, stolen, or damaged.
If your bank is insured by the FDIC (Federal Deposit Insurance Corporation) or, in the case of a credit union, the NCUA (National Credit Union Administration), your account will typically be covered up to $250,000 per depositor, per insured institution, for each account ownership category.
Easy Access to Cash
Checking accounts allow you to access your money quickly and easily, whether you need to pay for a meal or something unexpected, like a school donation. Setting up direct deposit allows your paychecks to be transferred directly into your checking or savings account, with some banks offering access to cash up to two days early.
You can then tap your funds by using your checking account’s debit card, writing checks, snagging some cash from the ATM, or making a transfer.
Pay Bills Conveniently
Here’s another benefit of a checking account: Having a checking account means you can get your bills taken care of without much effort. You might set up recurring payments to a car loan, for instance, or use a digital payment app to send money to your roommate, a friend, or your yoga teacher. You can also typically move funds quickly via wire transfer, which can be especially useful for international transactions, and other methods as well.
Debit Card for Purchases
When you open a checking account, you’re usually provided with a debit card that’s linked to the account. Similar to a credit card, you can typically use your debit card to pay in person or online for anything from this week’s groceries to a cool new pair of shades to a matcha latte.
Unlike a credit card, however, debit cards pull funds directly from your checking account. They usually only let you dip into funds you actually have on deposit, which can help you keep spending in check and stay on budget, not to mention avoid credit card debt.
Rewards
Some checking accounts come with rewards that can be a nice perk. For example, when you open an account, you might get a sign-up bonus. Who doesn’t like free money? Or your debit card may carry rewards, similar to those of a credit card, such as cash back.
Direct Deposit Benefits
Direct deposit can be a seamless way to get paid; in fact, more than 95% of Americans get paid this way, according to National Payroll Week. Direct deposit sends cash, ready to spend, straight into your bank account, so you don’t have to deal with depositing a check or cash.
FDIC Insurance Protection
As noted above, most financial institutions (but not all) are insured by either the FDIC or NCUA. In the very rare event of a bank failure, you would be protected from loss up to those limits of $250,000 per depositor, per account ownership category, per insured institution. Note: Some institutions offer programs that provide even more than $250,000 in insurance.
Cons of Checking Accounts
As you might guess, there are advantages and disadvantages to checking accounts, as is the case with most financial products. Checking accounts are designed to serve customers’ everyday, short-term money needs and can have a few potential downsides to consider.
Low or No Interest Earned
While your money is sitting in your checking account, it is probably earning very low, if any, interest. For instance, as of June 2025, the average interest checking account rate was a meager 0.07% of one percent, according to the FDIC. Translated into dollars and cents, that means that if you kept $5,000 in your checking account for a year, you would only earn $3.50 in simple interest.
That said, there are high-yield and premium checking accounts available that pay heftier interest rates. These may come with minimum deposit and balance requirements. Online-only banks frequently offer these accounts without those barriers, however, and with interest rates that are several times higher than the national average.
Potential Overdraft and Other Fees
Sooner or later, many people will try to transfer more money out of their checking account than they actually have on deposit. It could be a simple math error, or they might have forgotten about that on-the-fly payment they made to contribute to, say, a friend’s baby shower gift.
Not having enough money in your checking account can lead to overdraft fees. The average charge currently stands at a steep $25 to $35, with an average (as of 2024) of $27.08. Also, even if you have overdraft protection — meaning you have linked accounts so that money can be pulled from savings into checking to cover payments, if needed — you may still be charged a fee. However, it’s likely to be lower than an overdraft charge.
Also, check the fine print when signing up for a new checking account: There can be other fees, such as account maintenance and out-of-network ATM fees (more on those below).
Security Risks
While banks are extremely safe overall, there is always a small possibility of a security risk (such as a hack). Losing or having your debit card stolen and used without your authorization is another concern— and it can be a common one. A card thief could potentially gain access to the funds in your checking account.
It’s vital to report the issue within two days of noticing the card is missing so that you’ll be liable for no more than $50 in unauthorized usage. Otherwise, you could be liable up to $500 or more depending on the circumstances.
Minimum Balance Requirements
Some checking accounts require the account holder to maintain a certain balance to avoid monthly account fees. Or they might want account holders to keep a certain sum on deposit in order to earn a premium interest rate. Depending on the institution, this minimum deposit could be several hundred or more than a thousand dollars. If your balance dips below this amount, you could be hit with fees and/or lose your interest rate.
Quite simply, checking accounts make sense for the vast majority of Americans. It typically serves as the hub of one’s daily financial life.
Some people, though, are unbanked, meaning they have not (or are not able) to access the usual banking services. If you are seeking a checking account and haven’t been able to secure one, you can try a few other options:
• It might be easier to get an account at a credit union, if you qualify for one based on where you live, your profession, or other factors.
• Your banking history may reveal some issues, such as multiple overdrafts, as tracked by ChexSystems (a kind of reporting agency for the banking industry). In this situation, you might qualify for a second-chance account. This kind of account may have higher fees and/or minimum balance requirements, but it can be a good way to show that you can handle an account responsibly. In some cases, a second-chance account can be a stepping stone to a standard checking account.
When Other Accounts May Be Better
There are some situations in which another kind of account could be better than a checking account. A few scenarios to consider:
• If you are hoping to park your money for a while and earn interest vs. spend it, a savings account can be a good bet. Some savings accounts have limits on how many transactions can occur per month (check the fine print). Whether or not that applies, you will likely earn a higher interest rate than you would with a checking account. For instance, the current average interest rate for a savings account is 0.38% vs. 0.07% for checking.
• For those who want their money to earn still more money, a high-yield savings account can offer still more earning potential. At the time of publication, some online-only banks were offering rates in the range of 4.5%.
• A CD (or certificate of deposit) can be another way to earn a higher return on money you keep in a bank. However, these don’t offer the accessibility of a checking account. You agree to keep your funds on deposit in return for the bank guaranteeing a certain interest rate and are usually penalized if you withdraw funds before the end of your time.
• For those who want spending power without a checking account, prepaid debit cards can deliver. You load funds onto them and can then spend or pay bills with them. They are typically backed by a major network, like Visa or Mastercard.
• One other option is to use digital payment services, such as Venmo and PayPal. These can allow you to move funds to shop and otherwise spend without a bank account.
Checking Account Features To Consider
If you are looking for a checking account, you may want to focus on these three considerations:
ATM Access and Fees
Since accessibility is a key selling point of checking accounts, you likely want your money to be within easy and affordable reach. Check out a financial institution’s network of ATMs and make sure they are near your usual haunts.
Also see what the charges are for using an out-of-network bank: Certain banks (especially online-only ones) may waive those usual out-of-network fees that can ding you; these currently average $4.77 a pop.
Online/Mobile Banking
Today, it’s par for the course for financial institutions to provide online banking features and mobile banking apps, but some provide more robust, user-friendly digital services and offer them for free.
As you consider your options, you might look for a bank that helps you save automatically. A round-up function that nudges purchases up to the next whole dollar amount and adds the extra money to your savings can be valuable.
Also helpful are dashboards that allow you to see your money (earnings, spending, and savings) and credit score at a glance, for no extra charge. This feature can help you budget better.
Overdraft Protection
As mentioned above, many people have those “oops” moments and overdraw their accounts. Some banks will give you free overdraft protection up to a certain sum. For instance, they might cover up to $50 of your overdraft without charging you the standard fees. This can be a valuable feature when you are deciding which financial partner is right for you.
Get access to higher APY, credit card cash back rewards, discounts, and more.
Account Maintenance Fees
As noted above, some banks will charge monthly account maintenance fees for holding a checking account at their institution. It can be one of the ways that banks make money. These fees can range from, say, $5 to $12 a month or more, which can take a bite out of your budget.
You may find that some banks, especially online ones, offer no-fee checking accounts. Or a financial institution may waive fees if you keep a certain amount on deposit across your accounts or if you meet other requirements.
Customer Service and Support
Another factor to consider is the kind and quality of customer service and support a financial institution offers. Some people may gravitate toward online banks which typically have 24/7 online support by phone or text chat. Others may prefer banking with a traditional bank where they can meet in-person with team members. Consider what’s important to you to make the best decision for your news.
The Takeaway
For many people, a checking account can be a reliable hub for their personal finance needs. You can store your earnings securely and still easily access your money to pay bills and fund daily purchases.
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, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.
FAQ
Are checking accounts free?
Some are. You can often find free checking accounts from traditional and online-only banks as well as credit unions. While these accounts may be billed as “free,” keep in mind that some fees may apply, say, if you overdraft your account.
What happens if my checking is overdrawn?
If your checking account is overdrawn, that means you have tried to withdraw more money than you have in your account. This can lead to payments not being processed (a check bouncing, for example) and charges piling up. By linking a checking and savings account, you may be able to have funds automatically transferred from savings into checking to cover the shortfall. Your bank may charge you a fee, whether they cover the shortfall through overdraft protection or not.
Can I have multiple checking accounts?
There is usually no limit on how many checking accounts you can have. It can be convenient to have one for, say, your salary and your living expenses and another for a side hustle and related expenses.
Are checking accounts FDIC insured?
Most but not all checking accounts are FDIC-insured. You can look for this feature before opening an account. With FDIC insurance, you are covered for up to $250,000 per depositor, per account ownership category, per insured institution in the very rare event of a bank failure. Some banks have programs that offer even higher amounts of insurance.
Do checking accounts offer fraud protection?
Most banks will refund you if your account is hacked or your debit card is used without permission, provided you report it in a timely fashion. Check with your financial institution about their policies, but note that if you willingly sent money to an individual or business that turned out to be a scam, refunds are less likely.
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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
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The term “unicorn” was coined by venture capitalist Aileen Lee in 2013, to describe startup companies that reached a $1 billion post-money valuation.
The catchphrase — from the title of her article, “Welcome to the Unicorn Club: Learning From Billion-Dollar Startups” — was immediately and widely adopted, as it conveyed both the rarity and the somewhat mythical status of companies that hit the $1 billion benchmark.
Back in 2013, Lee counted 39 unicorns in the U.S. It was still considered exceptional for a private company to grow to that size without having an initial public offering or IPO.
Today, there are about 1200 to 1400 so-called unicorns globally, depending on the criteria used to identify these companies. But owing to a confluence of factors, including tighter capital markets, the number of unicorns has declined steadily in the last decade.
Key Points
• A unicorn is a startup that reached a post-money valuation of at least $1 billion.
• The term was coined by venture capitalist Aileen Lee in 2013. At the time it was an apt way to describe startups that attained a mythical level of success without an IPO.
• While unicorns are associated with Silicon Valley, unicorns can be found worldwide.
• Countries with the highest number of unicorns include the U.S., China, India, U.K., and France.
• Globally, the number of unicorns peaked in 2021, and has declined since then.
Top 10 Most Valuable Unicorns
As of January 2025, there are some 1,258 unicorns worldwide, with a cumulative business valuation of roughly $4.4 trillion, according to research by CB Insights, a business analytics platform.
Unicorns can be exciting for investors because they can represent rapid — even seemingly magical — growth. But are unicorns actually good investments? It’s important for investors to remember that, by definition, these companies haven’t yet come under the scrutiny of public markets.
Below is a chart of the unicorn companies with the highest valuations globally, according to CB Insights, as of January 2025.
Company
Valuation
Date Added
Country
Industry
SpaceX
$350 billion
12/1/2012
U.S.
Space
Bytedance
$300 billion
4/7/2017
China
Media & Entertainment
OpenAI
$300 billion
7/22/2019
U.S.
Enterprise Tech
Stripe
$70 billion
1/23/2014
U.S.
Fintech
SHEIN
$66 billion
7/3/2018
Singapore
Consumer Retail
Databricks
$62 billion
2/5/2019
U.S.
Enterprise Tech
Anthropic
$61.5 billion
2/3/2023
U.S.
Enterprise Tech
xAI
$50 billion
5/6/2024
U.S.
Enterprise Tech
Revolut
$45 billion
4/26/2018
U.K.
Financial Services
Canva
$32 billion
1/8/2018
Australia
Enterprise Tech
Source: CB Insights, as of January 31, 2025.
Characteristics of Unicorn Companies
The increase in the number of unicorns over time has meant that these companies come from a range of industries, sectors, and regions.
Unicorns by Industry
According to Crunchbase, as of June 2025, the top seven sectors with the largest number of unicorns are as follows:
• Software (894)
• Financial services (404)
• Information technology (383)
• Science and engineering (387)
• Data and analytics (379)
• Internet services (299)
• AI (283)
Unicorns by Geography
While the Bay Area’s Silicon Valley is still synonymous with startups, unicorns have gone global.
Top 5 Countries With the Most Unicorns
Country
Number of Unicorns
United States
702
China
302
India
119
U.K.
104
France
34
Source: Wikipedia, as of April 13, 2025
Age and Success Rate of Unicorns
Lately, U.S. unicorns have tended to be older when they enter the stock market. When Aileen Lee coined the term in 2013, the median age of a tech IPO company was nine years, data from University of Florida shows. Going back further in time, during the height of the dot-com bubble in 1999, the median age was four years.
Fast forward to 2023, and the median age jumped to 12.5 years.
In addition, while unicorn status may sound impressive, it doesn’t always translate to long-term success. According to a 2023 analysis by Bain Capital, less than 1% of the 2,500 unicorns they tracked worldwide generated $1 billion or more in revenues or cash — “a truer measure of sustainable success,” the report noted.
When it comes to who’s founding these unicorns, there has been some increase in diversity. Back in 2012 or 2013, when Aileen Lee did her initial IPO research, no unicorns had female founding CEOs. However, by 2024, 124 startups founded or co-founded by a woman became unicorns.
Why Are Unicorns Declining?
Owing to the range of criteria used to define and analyze unicorn companies, it can be difficult to pinpoint and track specific trends. One thing is clear, however: The rapid growth in the number of unicorn companies peaked several years ago and has declined steadily since then.
According to PitchBook, some 629 startups reached unicorn status in 2021. By 2024, though, only about 100 companies hit that mark worldwide, with 58 in the U.S.
What is contributing to the decline?
• Access to private capital. As mentioned above, companies are waiting longer before they go public, often because startups can continue to get investments from venture-capital firms (VCs) and private-equity funds in their later stages. Some prefer that option over the risky, complex process of having an IPO.
• Less capital for new ventures. One of the knock-on effects of private funds being tied up for longer is that new ventures are struggling to find capital they need.
• Late-state funding is less available. In addition, VCs are less inclined to provide funding at later stages.
Meanwhile, tech investing remains a bright spot for investors hungry for growth opportunities. Companies focused on artificial intelligence (AI) technologies were 44% of unicorns in 2024, according to CBInsights, a 7x increase over the previous decade.
How Do Unicorns Get Valued?
Many startups — even ones of unicorn size — are not profitable. Investors put in money under the assumption that profits will eventually come, and that’s why businesses may rely on longer-term forecasting. Similar to how it works when it comes to growth vs. value stocks, valuation metrics like price-to-sales ratios may be used in order to measure the company’s worth.
Investors may also come up with valuations by comparing unlisted firms with similar businesses that are publicly traded. Hence, a rising stock market may also lead to higher valuations for privately held companies, although overvaluation is an ongoing concern with many startups.
How to Invest in Unicorns
Accredited investors — those with $200,000 in annual income or $1 million in assets — can get exposure to unicorns by putting money into venture-capital funds: capital pools that invest in private companies. In recent years, they’ve attracted not just venture-capitalists, but also hedge funds, asset-management firms like mutual funds as well as sovereign wealth funds.
It’s important for would-be investors to bear in mind that it can take years for even a successful startup or unicorn to make a successful exit, either via an IPO, SPAC, direct listing, or an acquisition. On average, it takes eight years for a unicorn to exit, according to data by VisualCapitalist.
Can Average Investors Invest in Unicorns?
Unicorns don’t generally accept modest investments from individual or retail investors.
Jay Clayton, former chairman of the Securities and Exchange Commission, argued that smaller investors should get access to private-market investments. The fact that companies are staying private for longer has also made it true that individual investors are missing out more on businesses in their early stages.
But skeptics note that private markets don’t have the same disclosure requirements that public markets require, a situation that could leave retail investors in the dark about a company’s financials and increase the risk of fraud. Mutual funds can put up to 15% of assets in illiquid assets, but often they don’t allocate that much to private companies since these investments are tougher to sell.
Deep-pocketed retail investors can get in early with some startups via angel investing — when individuals provide funding to very young businesses. But these fledgling businesses tend to have valuations far below $1 billion.
💡 Quick Tip: Newbie investors may be tempted to buy into the market based on recent news headlines or other types of hype. That’s rarely a good idea. Making good choices shouldn’t stem from strong emotions, but a solid investment strategy.
Risks of Investing in Unicorns
Not all unicorns successfully transition into stock market stars. Some see their valuations dip in late private funding rounds. Some have even scrapped IPO plans at the last minute. Others disappoint after their debut in the public markets, finding that first-day pop in trading elusive or underperforming in the weeks after the IPO.
How do you know whether a unicorn is destined to be the next market darling or flame-out? There is no way to know for sure, but there are a number of risks when it comes to unicorn investing. Here are some:
• Lack of Profitability: Many unicorns offer deeply discounted services in order to supercharge growth. While venture capitals are used to subsidizing startups, public market investors may be tougher on these models.
• Market Competition: No matter how great an idea is and how much funding they bring in, there are always competitors. If another company has superior marketing, more users and higher sales, even a unicorn could stumble.
• Consumer/Business Need: Just because a founder has a cool idea and they can build it, doesn’t mean anybody will spend money on it. The true test of product relevance lies in actual market performance.
• Management Team: Who are the company’s founders, and what is the culture they are creating at their startup? Many startups fail, and a founder’s management style and lack of experience can be cited as major reasons why.
• Regulatory Changes: Some unicorns represent new business models or disrupt existing industries. Such changes may come with regulatory oversight that makes operating difficult.
Alternative to Unicorns in Startup Terminology
The surge in private-market tech investing has led to a new vernacular that’s specific to startup valuations. Here’s a table that covers some popular lingo.
List of Unicorn Terminology
Startup Term
Definition
Pony
Company worth less than $100 million
Racehorse
Company that became unicorns very quickly
Unitortoise
Company that took a long time to become a unicorn
Narwhal
Canadian company with a valuation of at least $1 billion
Minotaur
Company that has raised $1 billion or more in funding
Undercorn
Company that reached a $1 billion valuation then fell below it
Decacorn
Company with a valuation of at least $10 billion
Hectocorn
Company with a valuation of at least $100 billion
Dragon
Company that returns an entire fund, meaning the single investment paid off as much as a diversified portfolio
The Takeaway
While they started out as rarities, unicorns have since multiplied. For investors, unicorn companies may appear to be a good way to diversify and get access to a high-growth business. But it’s important to remember that many unicorns are unprofitable businesses that secure $1 billion valuations by making very long-term projections.
It’s important to look closely at a new company’s management team, history, as well as financials before investing in it. Whether you’re a new or seasoned investor, researching which stocks to buy and when to buy them can be time-consuming and challenging.
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FAQ
What is the biggest unicorn company?
A handful of unicorns have reached a valuation of $100 billion or more while still private, including SpaceX, ByteDance, and OpenAI.
What is the difference between a unicorn and a startup?
A unicorn is a startup, or private company that is VC funded, that reaches a $1 billion valuation before going public. Not all startups become unicorns.
Are unicorns risky?
Yes, like many startups that have yet to prove themselves in the public marketplace, unicorns come with a risk of failure. Their pre-market valuation may seem impressive, but isn’t a guarantee of success in terms of generating revenue or cash, or besting the competition.
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When a consumer walks into a favorite store and spends money there, they might wonder if they should invest in that brand. Enter: retail stocks, or shares of companies that sell everything from clothing, books, computers, homeware, tools, groceries to auto parts.
It may feel like a good idea to invest in retail stocks because we’re familiar with their stores, the products, and understand the brand identities. However, retail investing can actually be tricky, especially in today’s ecosystem. Retail companies have dealt with a lot in recent years: shifting consumer preferences, the rise of online shopping, a slew of store closures, trade wars, a global pandemic that brought about quarantine measures.
Key Points
• Retail stocks represent companies selling various goods to consumers.
• Visits to retailers’ physical stores may offer insights into company health.
• Online sales often outpace in-store purchases, especially during holidays.
• Metrics like same-store sales, margins, and inventories are crucial for evaluating stocks.
• Retail stocks tend to be volatile and cyclical, influenced by economic conditions.
How to Invest in Retail Stocks
First, investors need to check to see if the retail company is public. Being public means shares of the business are available for any investor to buy in the stock market. They can do this by looking up the company’s stock ticker symbol on the internet or via their brokerage account. For those who just want exposure to the industry as a whole, they can find a retail-stock exchange-traded fund, or ETF.
Typically, retail companies go public in order to raise additional funds that are used to open more stores, expand overseas, invest in their e-commerce platform, or buy another retail company.
As a stockholder in a retail company, the investor holds a partial ownership, or a share, of the business. The owner of a stock is also entitled to dividends the company may disburse, and benefit from any potential increase in its share price. They also have the right to participate in shareholder votes.
Being a retail investor isn’t for the faint of heart. It takes a lot of due diligence. Investors should read quarterly earnings reports the company makes, monitor for any additional announcements the company makes related to company performance or new products, and pay attention to management changes like a new CEO or CMO.
It also takes an investor who isn’t afraid of a little volatility. Retail stocks can be particularly turbulent when reporting earnings for the back-to-school or holiday seasons — when many companies make a majority of their sales.
Remember back in the day when the mall was the place everyone went to hang out or go shopping? That reality has shifted radically with the advent of ecommerce. Consumers have increasingly migrated online to make their purchases, and retail companies have had to change alongside them.
Take holiday spending, the most important season for many retailers. Online spending has continued to outpace in-store spending, with the gap widening in recent years due to mobile spending.
In some cases, the e-commerce revolution has changed the stores along Main Street or malls into more of a marketing tool, rather than a first point of sale. Over the last few decades, stores have had to adapt to create exclusive consumer experiences only found in-store.
However, some digital-native brands have gone the opposite way, starting online and then opening physical stores. Examples include Warby Parker, Amazon, Allbirds, Skims, and Away, among others.
Looking at Retail Stock Metrics
Here are some ways investors can evaluate whether to invest in a public retail company:
• Visit a few physical locations. This way, an investor can get a sense of what’s happening on the ground. Is the store selling timely merchandise? Is the store well lit and laid out? Is there a lot of foot traffic? All of these are important ways an investor can try to gauge a company’s health.
• Visit the store’s online platform. If the store’s e-commerce operation seems strong, it is easy to navigate and offers customer service. This, too, points to the good health of a company.
• Next, it’s time to dig deeper into the company’s finances. Some measures that can be particularly helpful to retail investors include comparable store sales–also known as same-store sales. These are sales trends of stores that have been open at least one year.
• Also examine margins, or how much the revenues a company makes after subtracting the cost of goods sold (COGS), and inventories, or how much in goods the company has stocked. Too much inventory can signal slow sales, while too little may be a sign of operational or production issues down the road. These numbers may fluctuate depending on the season.
• Use traditional valuation metrics, such as price-to-earnings ratio or price-to-sales ratio. Public retail companies are required to report net income and revenue figures, which investors can use to gauge how expensive or cheap the shares are trading at.
Pay attention to broader industry trends by looking at earnings of competitors or changes in e-commerce trends. The National Retail Federation (NRF) could also be a good resource for information.
Possible Risks of Investing in a Retail Stock
Like all investments, retail stocks can come with risks. Take the global pandemic, which led to a quarantine across many cities in the world in 2020, causing consumers to be stuck at home and be wary of visiting stores.
Here are some of the other ways the industry can be vulnerable:
• Retail stocks can be highly cyclical, or tied to economic conditions. In a recession, non-essential purchases may be the first to go for many consumers and may cause an otherwise healthy retail store to sink. Investors may benefit from balancing their portfolio with non-cyclical companies, like utility, telephone or health-care stocks.
• Retailers are often at the mercy of changing regulations. This could include rising minimum wages or regulation changes in a supply chain.
• Retail stocks are also often at risk of consolidation. The retail industry is shrinking in some ways, with larger players constantly buying or swallowing up smaller companies. This causes a rapidly changing landscape that must be monitored at all times.
Retail businesses can be volatile stock investments, going up and down with the seasons, along with changes in consumer confidence. Furthermore, the e-commerce and mobile phone revolution has added pressures to the retail financial landscape.
Investing in retail stocks involves keeping tabs on how brands are dealing with shutting malls, building digital platforms and changing expectations among consumers. Investors can also benefit from understanding more retail-specific metrics like same-store sales, margins and inventories. They can also use traditional valuation measures like P/E or P/S ratios.
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
What are retail stocks?
Retail stocks are shares of retail companies, which could include brands or chains that sell consumer products in physical locations or online. Examples of retail products include sporting goods, food, books, hardware, and more.
What are some risks involved with retail stocks?
Investing in retail stocks involves risks such as the cyclical nature of the retail industry, potential for changing regulations, and risks of consolidation.
What are some ways to invest in retail companies?
Investors can buy shares of retail companies, or even ETFs or index funds that are focused on the retail sector. There may be other ways to invest, too, such as through corporate bonds.
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According to the US Bureau of Labor Statistics, the job outlook for software developers is going to increase by 17% from 2023 to 2033. This represents a significantly higher projected growth than the average for all occupations. Median annual pay for software developers was $131,450 as of May 2023 (the most recent government statistic available.)
According to CourseReport, the average cost of code school is $13,584. Not all students have enough cash on hand to cover the cost. Fortunately, there are ways to make coding bootcamp more affordable. Read on for a closer look at how these programs work, including average costs and payment options.
Key Points
• Coding bootcamps offer comprehensive training in multiple programming languages and skills.
• The average cost is $13,584, with financing options like loans and deferred tuition.
• Free bootcamps typically support specific demographics and underrepresented groups.
• Graduates can secure jobs as software engineers, data scientists, and mobile developers.
• Median starting salary for bootcamp graduates is $70K, increasing to $99K by the third job.
What Do Students Learn in Coding Bootcamp?
Students will learn a variety of programming languages, rather than focusing on just one, to be equipped for a dynamic job market. When students graduate, they may have a portfolio, a website, profiles on programming websites, as well as interviewing and job hunting skills.
These programs teach frameworks and programming languages like JavaScript, CSS, HTML, Ruby on Rails, Python on Django, and PHP. According to a Course Report study, 79% of bootcamp graduates find jobs as programmers.
Coding bootcamps are intensive programs that teach skills like data science, cybersecurity, full-stack web development, and technical sales, among others. Typically, the average bootcamp is around 14 weeks long but can range anywhere from one week to a year or two. Courses are offered online or in-person and at dedicated coding bootcamp facilities or at universities a bootcamp program might partner with.
How Much Does Coding Bootcamp Cost?
The coding bootcamp cost varies depending on the program. While the average full-time coding bootcamp in the US costs $13,584, but there’s a wide range to bootcamp tuition. It’s a good idea to ask about costs for the programs you are interested in so you’ll have adequate information to compare programs. The cost of coding bootcamp might seem high, but paying for a college degree can be a much costlier investment.
If the cost seems out of reach, looking into free coding bootcamps might be an alternative. Some free programs are open to anyone, while others require passing one or more tests. There are also free coding programs targeted to women, girls, and residents of underserved neighborhoods. Some of the free programs offer just basic instruction in coding, while others are more comprehensive.
There are a variety of options to pay for coding bootcamp.
Loans
One option might be taking out a coding bootcamp loan. Some coding bootcamps partner with lenders that offer various terms and interest rates depending on a variety of the student’s financial factors. Bootcamps might also offer their own financing, or students might choose to apply for a loan through a bank or credit union. It’s important, however, to read the fine print of any loan agreement to be sure you’re aware of any fees, such as an origination fee or early repayment fee, that could add to the cost of the financing.
Another popular option is a personal loan. This is typically an unsecured loan available from banks, credit unions, and online lenders. The interest rate is usually less than what your credit card charges, and the repayment term is often between one and seven years.
Alternative Ways to Pay Tuition
Coding bootcamps may also offer an income sharing agreement (ISA) or deferred tuition. Students who choose an ISA agree to pay a percentage of their income to the school for a certain period of time after they graduate and find a job. With deferred tuition, students will either pay no upfront tuition or they’ll pay a small deposit, and then begin paying tuition once they graduate and secure a job.
The terms of each ISA or deferred tuition program differ by program. Some courses may not require students to pay tuition if they don’t secure a job within a certain timeframe of graduating at a certain salary, so read the fine print to learn details.
If students are already working, they might consider asking their employer to fund part of or all of their boot camp education. By demonstrating to their employer that by increasing their skill set they’ll be able to contribute more to the company and boost their productivity, their employer might be willing to pay for some of the program cost.
US military veterans may be able to pay for approved coding bootcamps using their GI Bill benefits.
Paying Out-of-Pocket
Using personal savings to pay for a coding bootcamp program is an option some students might have. While it may be difficult to part with the money, the return might be worth it. The median starting salary for a coding bootcamp grad is around $70K for their first job, rising to $99K by their third job as of mid-2025.
Students seeking scholarship funds won’t have far to look. Like scholarships for any other education program, these are available to students who meet a variety of qualifications, for instance, residence in certain geographic locations, students of diverse genders and cultural backgrounds, veterans, and military spouses, among many others.
Some scholarships might be need-based, while others will be based on merit. The amount of tuition and other costs that are covered will vary by scholarship. An internet search should reveal multiple scholarship options.
Types of Jobs for Coders
After graduating from coding bootcamp, students will be qualified to work in a variety of jobs, including:
• Software engineer: working with Ruby, HTML, CSS, and JavaScript.
• Data scientist: discovering insights from massive amounts of data.
• Back-end web developer: using PHP, Sql, Ruby, Python, or Java.
• Front-end web developer: utilizing HTML, CSS, and JavaScript to design websites.
• Full-stack developer: troubleshooting website design on the front and back end.
• Mobile developer: building mobile apps.
There are many options, and students can look for a job that best suits their skills.
The Takeaway
If you want to be a part of the growing technology field, a coding bootcamp might be a route you can take to learn programming skills. While the average cost of $13K can be a deterrent, there are a number of ways to make the tuition more manageable, including scholarships, deferred tuition programs, tuition financing, and/or personal loans.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
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FAQ
How can you afford coding bootcamps?
Many students afford the average $13K cost of coding bootcamps by applying for scholarships and/or loans. Using savings or employer funding are other options.
How much does coding bootcamp cost?
As of mid-2025, the average cost of coding bootcamp is $13,584.
How can I get a loan for a computer bootcamp?
You can explore what the business offering the bootcamp may provide in terms of financing options or see what personal loans are available from banks, credit unions, and online lenders. Compare rates and terms to find the best fit.
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