Jun
11
2025

Savings Goals by Age: Smart Financial Targets by Age Group

By | Budgeting & Goals, Growing Wealth, money | Comments Off on Savings Goals by Age: Smart Financial Targets by Age Group

Mapping out your financial future can be daunting, especially if you only have a vague sense of what you want to accomplish.

It can be useful to consider financial milestones to help you chart your journey from college graduation through retirement. Here’s a look at some common savings goals by age to help you orient yourself and build a plan.

Key Points

•   In your 20s, consider prioritizing paying off high-interest debt, building an emergency fund with three to six months’ expenses, and starting to save for retirement.

•   In your 30s, you may prioritize saving for a home down payment, increasing retirement contributions, and setting up a 529 college plan for children.

•   In your 40s, think about growing your emergency fund, protecting assets with insurance, and continuing to save for retirement.

•   In your 50s, take advantage of catch-up contributions to increase retirement savings and consider paying off or refinancing your mortgage.

•   In your 60s, you may continue to fund retirement accounts, assess savings, and plan a retirement income strategy.

Savings Goals for Your 20s

In your 20s, people are often just out of school, starting a career, and getting their life in order. As if that weren’t enough, they may face challenges like student loan debt or credit debt. Now is the time to set financial goals, consider an investment strategy, and start building healthy financial habits.

Paying Off High Interest Debt

If you have any high-interest debt — typically debts close to 8% or more — you might focus on paying it off. High-interest payments can cost you a lot over the life of a loan.

Credit cards, which often allow minimum payments that are much less than the total balance due, can be particularly costly as interest on the balance accrues. The more money going toward high-interest debt, the less you can focus on your savings goals.

Building Emergency Savings

At this age, people are often just getting on their own feet and might not have a lot of extra cash to stock away. Establishing a rainy day fund can be a useful savings goal. Generally, emergency funds contain at least three to six months’ worth of living expenses.

This fund can help cover emergencies like unexpectedly needing to replace a car transmission, a trip to urgent care, or losing your income. Since you never know when you’ll need to access your emergency fund, consider saving it in an easily accessible vehicle, such as a high-yield savings account.

Putting your money into interest-bearing accounts can help your money grow exponentially over time through the power of compound interest. Compound interest allows you to earn interest on the interest you earn as well as the principal, so higher interest rates can translate into higher savings over time.

Recommended: Planning your emergency fund? Our emergency fund calculator can assist you in setting the right target.

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Saving for Retirement

The earlier you start investing for retirement, the longer you can take advantage of the returns you may earn on your investments.

Compound returns refers to the gains investors may see on both their initial investments and any profits they may generate, assuming they’re reinvested. Unlike compound interest, the rate of return on investments can vary significantly depending on market performance, and investors may experience losses on their initial principal, as well. Over the long-term, however, a well-diversified portfolio has the potential to see substantial growth, and this is true of investments in retirement plans, as well.

Consider taking advantage of any retirement accounts your employers offer, such as a 401(k). If your employer doesn’t offer a retirement plan, there are other options, such as setting up an individual retirement account (IRA), where you can save for retirement in a tax-advantaged way on your own.

Savings Goals for Your 30s

In your 30s, people are often more settled into a career path and may be thinking about other goals, such as purchasing a house or having kids.

More Saving for Retirement

As your income grows and retirement gets a little bit closer, consider increasing the amount you’re setting aside for retirement. If your employer offers a match to your 401(k) contributions, taking advantage of the match can be a wise move, since this is essentially free money.

Buying a Home

If you’re thinking about buying a home, you’ll want to focus on saving for a down payment. The amount you will need to save will depend on housing prices in the area where you’re looking to buy. A larger down payment can make it easier to secure a mortgage, and can also mean that you pay less interest over the life of the loan.

Also, lenders may require borrowers to have mortgage insurance if they’re making a down payment smaller than 20%, which is an added expense to the home-buying process.

Setting up College Funds

If you have children, another consideration is saving for their college education. One way you can do this is to open a 529 college savings plan that helps you save for your child’s tuition and other education-related expenses. Just be sure not to neglect other long-term goals, such as retirement, while saving for your child’s college education.

Savings Goals for Your 40s

As you enter your forties, you are likely entering your highest earning years. If you have your high-interest debts behind you, you can devote your attention to building your net worth.

Keeping an Eye on Your Emergency Fund

The amount of money you needed to cover six months’ worth of expenses in your 20s is likely far less than what you need now, especially if you have a mortgage to pay and children to support. You’ll want to make sure that your emergency fund grows with you.

Protecting Your Assets

Now that you may have a more substantial income and own some valuable things, such as a home and a car, you’ll want to make sure you protect those assets with adequate insurance. Home and auto insurance protect you in the event that something happens to your house or your car.

You may also want to consider getting life insurance if you haven’t already. This can provide a cash cushion to help your family replace your income or cover other expenses should you die. The younger you are when you purchase life insurance, generally the less expensive it will be.

Savings Goals for Your 50s

In your 50s, you’re likely still in your top earning years. You may still be paying off your mortgage, and your kids may now be preparing for college or out of the house.

Taking a Closer Look at Retirement Savings

As retirement age approaches, you’ll want to continue contributing as much as you can to your retirement account. When you turn 50, you are eligible to make catch-up contributions to your 401(k) and IRAs.

These contributions provide an opportunity to boost your retirement savings if you haven’t been able to save as much as you hoped up to this point. Even if you have been meeting your savings goals, the contributions allow you to throw some weight behind your savings and take full advantage of tax-advantaged accounts in the decade before you may retire.

Continuing to Pay Off a Mortgage

If you think your monthly mortgage payments may be too high to manage on a fixed income, you might consider paying off or refinancing your mortgage before you retire.

Goals for Your 60s

As you enter your 60s, you may be nearing your retirement. However, when it comes to saving, you don’t have to slow down. As long as you are earning income, you might want to keep funding your retirement accounts.

Thinking Long-Term

Now is a good time to assess how much you have saved for retirement and perhaps adjust what you are contributing (based on how much you’ve already put aside and how much you can afford). At the same time, you may want to plan out a retirement income strategy to determine when you’ll start withdrawing funds and how much you’ll take each month or year. You’ll also want to decide when to take Social Security retirement benefits. Delaying benefits until age 70 could increase the monthly payments you receive.

The Takeaway

Everyone’s personal timeline is different. The milestones you hit and when you hit them may vary depending on your personal situation. For example, someone graduating from college with $50,000 in student loan debt is at a very different starting point than someone who graduates with no debt. And while someone might be able to buy a house in their early 30s, others may live in a more expensive area and need more time to save.

No matter your starting point and situation, a simple way to manage your finances at any age is to open a checking and savings account where you can spend, save, and earn all in one product.

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 3.80% APY on SoFi Checking and Savings.

FAQ

What primary savings goal should I focus on in my 20s?

The top priority in your 20s is building a solid financial foundation. This may mean creating a plan to pay off high-interest debt, establishing an emergency fund that can cover three to six months of living expenses if a financial emergency arises, and starting to save for retirement.

What are the benefits of starting to save for retirement early?

Starting to save for retirement early allows you to take full advantage of compound returns. While all investments are subject to the risk of loss, compound returns may lead to substantial growth over the long term. Even small contributions can grow significantly over decades, making it easier to meet your retirement goals.

Besides retirement, what other major savings goals should I consider?

Beyond retirement, important financial goals include building an emergency fund to cover unexpected expenses, saving for a down payment on a home, and setting aside funds for children’s college education. It’s also wise to regularly review insurance coverage to help protect your assets.

What should I consider when planning my retirement income strategy?

The first step in planning your retirement income strategy is to assess how much you have saved. You may need to adjust your contributions to your retirement accounts or other investments to help you reach your goals. You should also decide when you want to start withdrawing money from your accounts, along with when you want to start taking Social Security benefits.


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Jun
10
2025
How a Minsky Moment Happens, and How to Spot One

How a Minsky Moment Happens, and How to Spot One

By | Growing Wealth, invest, Investing, Terminology | Comments Off on How a Minsky Moment Happens, and How to Spot One

A Minsky moment is an economic term describing a period of optimism that ends with a market crash. It describes the point at which a market boom marked by speculative trading and increasing debt suddenly gives way to a freefall marked by plunging market sentiment, asset values, and economic activity.

It is named for American economist Hyman Minsky, who studied the characteristics of financial crises, and whose “financial instability hypothesis” offered reasons why financial markets were and would be inherently unstable. Minsky died in 1996, and the phrase “Minsky moment” was coined in 1998, when a portfolio manager used it in reference to the 1997 Asian debt crisis, which was widely blamed on currency speculators.

Key Points

•   A Minsky moment describes the shift from market optimism to a sudden financial crash.

•   The three phases leading to a Minsky moment are hedge, speculative, and Ponzi borrowing.

•   In the Ponzi phase, high-risk lending and borrowing rely on asset growth to cover debts.

•   A crisis occurs when asset values drop and liquidity decreases, leading to market instability.

•   The 2008 subprime mortgage crisis is a classic example of a Minsky moment in action.

How Does a Minsky Moment Happen?

A Minsky Moment refers to something sudden, though the economist maintained that it doesn’t arise all at once. He identified three stages by which a market builds up to the convoluted speculation and complete instability that finally undoes even the longest bull markets.

1.    The Hedge Phase: This often comes in the wake of a market collapse. In this phase, both banks and borrowers are cautious. Banks only lend to borrowers with income to cover the principal of the loan and interest payments; and borrowers are wary of taking on more debt than they’re highly confident they can repay entirely.

2.    Speculative Borrowing Phase: As economic conditions improve, debts are repaid and confidence rises. Banks become willing to make loans to borrowers who can afford to pay the interest but not the principal, but the bank and the borrower don’t worry because most of these loans are for assets — stocks, real estate and so on — that are appreciating in value. The banks are also betting that interest rates won’t go up.

3.    The Ponzi Phase: The third and final phase leading up to the Minsky Moment is named for the iconic fraudster Charles Ponzi. Ponzi invented a scheme that offers fake investments, and gathers new investors based on the returns earned by the original investors. It pays the first investors from new investments, and so on, until it collapses.

In Minsky’s theory, the Ponzi phase arrives when confident borrowers and lenders graduate to a new level of risk-taking and speculation: when lenders lend to borrowers without enough cash flow to cover the principal payments or the interest payments. They do so in the expectation that the underlying assets will continue rising, allowing the borrower to sell those assets at prices high enough for them to cover their debt.

The longer the growth swing in the market, the more debt investors take on. While those investments are still rising and generating returns, the borrowers can use that money to pay off the debt and the interest payments. But assets eventually go down in value, in any market, even just for a while.

At this point, the investors are relying on the growth of those assets to repay the loans they’ve taken out to buy them. Any interruption of that growth means they can’t repay the debt they’ve taken on. That’s when the lenders call in the loans. And the borrowers have to sell their assets — at any price — to repay the lenders. When there are thousands of investors doing this at the same time, the values of the underlying assets plummet.

This is the Minsky moment.

In addition to plunging prices, a Minsky moment is usually accompanied by a steep drop in market-wide liquidity. That lack of liquidity can stop the daily functioning of the economy, and it’s the part of these crises that causes central banks to intervene as a lender of last resort.

The Minsky Moment and the 2008 Subprime Mortgage Crisis

The 2008 subprime mortgage crisis offered a very clear and relatable example of this kind of escalation, as many people borrowed money to buy homes they couldn’t afford. They did so believing that the property value would go up fast enough that they could flip the house to cover their borrowing costs, while earning a tidy profit.

Minsky theorized that a lengthy economic growth cycle tends to generate an outsized increase in market speculation. But that accelerating speculation is often funded by large amounts of debt on the part of both large and small investors. And that tends to increase market instability and the likelihood of sudden, catastrophic collapse.

Accordingly, the 2008 financial crisis was marked by a sudden drop and downward momentum fueled investors selling assets to cover short-term debts. Some of those included margin calls, which are when an investor is forced to sell securities to cover the collateral needed to borrow money from a brokerage.

How to Predict the Next Minsky Moment

While Hyman Minsky provided a framework of the three escalating phases that lead up to a market collapse, there’s no way to tell how long each phase will last. Using its framework can help investors understand where they are in a broader economic cycle, but people will disagree on how much debt is too much, or the point at which speculation threatens the stability of the markets.

Most recently, market-watchers keep an eye on the high rates of corporate debt in trying to detect a coming Minsky moment. And even the International Monetary Fund has sounded warning bells over high debt levels, alongside slowing growth around the planet.

But other authorities have warned of other Minsky moments over the years that haven’t necessarily happened. It calls to mind the old joke: “The stock market has forecast nine of the last five recessions.”

The Takeaway

A Minsky moment is named after an economist who described the way that markets overheat and collapse. And the concept can help investors understand where they are in a market cycle. It’s a somewhat high-level concept, but it can be useful to know what the term references.

There’s also a framework that may help investors predict, or at least keep an eye out for, the next Minsky moment. That said, nobody knows what the future holds, so that’s important to keep in mind.

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

FAQ

What is a Minsky Moment named after?

A Minsky Moment is named after American economist Hyman Minsky, who studied the characteristics of financial crises, and whose “financial instability hypothesis” offered reasons why financial markets were and would be inherently unstable.

What are the three stages of a Minsky Moment?

The three stages of a Minsky Moment are the hedge phase, the speculative borrowing phase, and the Ponzi phase.

Can you predict a Minsky Moment?

Not really, as there’s no way to accurately predict how long each “phase” of Minsky’s framework will last. That framework may help investors understand the broader economic cycle, but no one has a crystal ball.

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10
2025
What’s the Reflation Trade?

What’s the Reflation Trade?

By | Growing Wealth, invest, Investing | Comments Off on What’s the Reflation Trade?

The reflation trade is a bet that certain sectors of the market perform well immediately after a recession or economic crisis. Essentially, it’s a bet on cyclical stocks at the beginning of a market recovery.

Reflation is the recovery in prices that typically comes immediately after a low-point in the economic cycle — often after economic stimulus, and the reflation trade is the purchase of specific stocks or stocks within sectors believed to outperform in that type of environment.

Key Points

•   Reflation trade strategy focuses on sectors expected to thrive post-recession.

•   Investment areas include hospitality, dining, energy, materials, financials, value stocks, bonds, and commodities.

•   Small cap stocks are also beneficial in this strategy.

•   A reflation trade strategy bets on economic recovery and growth.

•   Diversification across different types of reflation assets is recommended for balanced risk and reward.

Reflation vs Inflation

While both reflation and inflation are characterized by rising prices, they are not the same thing.

Reflation is a recovery of prices lost during an economic downturn along with employment growth, and many economists see reflation as a healthy sign of an improving economy. It often accompanies economic stimulus, and may reflect monetary policy designed to stimulate spending and halt deflation.

Inflation, on the other hand, does not look at employment or any other economic factors. It is the rise in prices beyond their “normal” range, and poses a threat to economic recovery, since it can reduce the purchasing power of consumers and make it more expensive to borrow money.

Reflation is also different from what happens during stagflation, in which prices go up but wages don’t follow.


💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Understanding Reflation Trade Opportunities

Reflation doesn’t just mean that the market as a whole will rise as economic activity returns to normal or even higher levels. Instead there’s a focus on certain sectors as they reflate after a decline.

For example, some investors might see reflationary dynamics in sectors like hospitality or dining during a pandemic, along with travel and tourism. It may also be noticeable, under those circumstances, in more indirectly affected sectors like energy and materials.

Again, assuming an economy suffers a pandemic, part of the reflation trade could be a switch from purchases of goods to services, as people go out more, whether it’s movie theaters, restaurant meals, theme parks and hotels. These are the sectors that would perform well if the reflation thesis turned out to be true.

Investors interested in the reflation trade can invest in individual stocks, or get more diversified exposure by investing in sector-specific exchange-traded funds (ETFs) or index funds.

Get up to $1,000 in stock when you fund a new Active Invest account.*

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*Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

Reflation Trade Sectors

While hospitality stocks might make sense for investors considering a reflation trade, there are other sectors that typically perform well in most reflationary environments. Here’s a look at a few of them:

Financial Stocks

Banks and other financial institutions tend to do well after an economic recession, since they can benefit from both higher interest rates and ramped up consumer spending.

Value Investing

Companies that deliver steady, long-term growth often get undervalued during economic downtimes, meaning that they’re poised for better performance as the market begins to improve. That’s the logic behind value investing.

Bonds

When interest rates are rising — in either the short- or the long-term — investing in bonds may benefit from a reflationary market.

Commodities

Since commodities tend to perform well during both periods of inflation and periods of economic growth, they’re a favored investment among those looking for a reflationary trade. As such, commodities trading could be an attractive area in a reflationary market.

Small Cap Stocks

Investments in small cap stocks tend to increase in value after recessions or during periods of growth, making them another asset that investors might consider in a reflationary market.


💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

The Takeaway

The reflationary trade is a bet on specific sectors of the economy or certain types of asset classes in the aftermath of an economic downturn. If you’re interested in incorporating the reflation trade into your portfolio, you could do so either via individual stocks or by buying sector-specific exchange-traded funds (ETFs) or mutual funds.

But note that the economy is a complicated thing, and that there are cycles it naturally takes, but it’s also susceptible to all sorts of other events. That includes natural disasters, political changes, or even pandemics and other global crises. With that in mind, it can be difficult to be sure of what sort of environment the economy is in, exactly, at any given time.

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).

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

FAQ

Is reflation the same as inflation?

No, reflation refers to a recovery in prices or value lost during an economic downturn, along with employment growth. Inflation is simply a rise in the prices of goods and services over time.

What are common reflation trade sectors?

Common reflation trade sectors include stocks of different types (such as financial stocks, small-cap stocks, etc.), bonds, and commodities.

What does reflation trade refer to?

The reflation trade is a bet that certain sectors of the market perform well immediately after a recession or economic crisis. In other words, it’s a bet on cyclical stocks at the beginning of a market recovery.

Photo credit: iStock/eugenesergeev

SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

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


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

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Claw Promotion: Customer must fund their Active Invest account with at least $50 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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What Is the Spot Market & How Does It Work?

By | Growing Wealth, invest, Investing, Terminology | Comments Off on What Is the Spot Market & How Does It Work?

A spot market is a market where buyers meet sellers and make an immediate exchange. In other words, delivery takes place at the same time payment is made. That can include stock exchanges, currency markets, or commodity markets.

But often when discussing spot markets, we’re talking about commodities. Commodity markets are somewhat different from the markets for stocks, bonds, mutual funds, and ETFs, all of which trade exclusively through brokerages. Because they represent a physical good, commodities have an additional market — the spot market. This market represents a place where the actual commodity gets bought and sold right away.

Key Points

•   Spot markets involve instant trades and immediate delivery.

•   Spot prices reflect real-time supply and demand.

•   Spot markets are less susceptible to manipulation.

•   OTC and centralized exchanges facilitate spot trades.

•   Futures markets are speculative, while spot markets are organic.

Spot Markets Definition

If you’re trying to define the spot markets, it may be helpful to think of it as a public financial market, and one on which assets or commodities are bought and sold. They’re also bought and sold for immediate, or quick, delivery. That is, the asset being traded changes hands on the spot.

Prices quoted on spot markets are called the spot price, accordingly.

One example of a spot market is a coin shop where an individual investor goes to buy a gold or silver coin. The prices would be determined by supply and demand. The goods would be delivered upon receipt of payment.

Understanding Spot Markets

Spot markets aren’t all that difficult to understand from a theoretical standpoint. There can be a spot market for just about anything, though they’re often discussed in relation to commodities (perhaps coffee, corn, or construction materials), and specific things like precious metals.

But again, an important part of spot market transactions is that trades take place on the spot — immediately.

Which Types of Assets Can Be Found on Spot Markets?

As noted, all sorts of assets can be found on spot markets. That ranges from food items or other consumables, construction materials, precious metals, and more. If you were, for instance, interested in investing in agriculture from the sense you wanted to trade contracts for oranges or bananas, you could likely do so on the spot market.

Some financial instruments may also be traded on spot markets, such as Treasuries or bonds.

How Spot Market Trades Are Made

In a broad sense, spot market trades occur like trades in any other market. Buyers and sellers come together, a price is determined by supply and demand, and trades are executed — usually digitally, like most things these days. In fact, a spot market may and often does operate like the stock market.

As noted, stock markets are also, in fact, spot markets, with financial securities trading hands instantly (in most cases).


💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.

What Does the Spot Price Mean?

As mentioned, the spot price simply refers to the price at which a commodity can be bought or sold in real time, or “on the spot.” This is the price an individual investor will pay for something if they want it right now without having to wait until some future date.

Because of this dynamic, spot markets are thought to reflect genuine supply and demand to a high degree.

The interplay of real supply and demand leads to constantly fluctuating spot prices. When supply tightens or demand rises, prices tend to go up, and when supply increases or demand falls, prices tend to go down.

The Significance of a Spot Market

The spot market of any asset holds special significance in terms of price discovery. It’s thought to be a more honest assessment of economic reality.

The reason is that spot markets tend to be more reliant on real buyers and sellers, and therefore should more accurately reflect current supply and demand than futures markets (which are based on speculation and can be manipulated, as recent legal cases have shown. More on this later.)

Types of Spot Markets

There’s only one type of spot market — the type where delivery of an asset takes place right away. There are two ways this can happen, however. The delivery can take place through a centralized exchange, or the trade can happen over the counter.

Over-the-counter

Over-the counter, or OTC trades, are negotiated between two parties, like the example of buying coins at a coin shop.

Market Exchanges

There are different spot markets for different commodities, and some of them work slightly differently than others.

The spot market for oil, for example, also has buyers and sellers, but a barrel of oil can’t be bought at a local shop. The same goes for some industrial metals like steel and aluminum, which are bought and sold in much higher quantities than silver and gold.

Agricultural commodities like soy, wheat, and corn also have spot markets as well as futures markets.

Spot Market vs Futures Market

One instance that makes clear the difference between a spot market and a futures market is the price of precious metals.

Gold, silver, platinum, and palladium all have their own spot markets and futures markets. When investors check the price of gold on a mainstream financial news network, they are likely going to see the COMEX futures price.

COMEX is short for the Commodity Exchange Inc., a division of the New York Mercantile Exchange. As the largest metals futures market in the world, COMEX handles most related futures contracts.

These contracts are speculatory in nature — traders are making bets on what the price of a commodity will be at some point. Contracts can be bought and sold for specific prices on specific dates.

Most of the contracts are never delivered upon, meaning they don’t involve delivery of the actual underlying commodity, such as gold or silver. Instead, what gets exchanged is a contract or agreement allowing for the potential delivery of a certain amount of metal for a certain price on a certain date.

For the most part, futures trading only has two purposes: hedging bets and speculating for profits. Sophisticated traders sometimes use futures to hedge their bets, meaning they purchase futures that will wind up minimizing their losses in another bet if it doesn’t go their way. And investors of all experience levels can use futures to try to profit from future price action of an asset. Predicting the exact price of something in the future can be difficult and carries high risk.

The spot market works in a different manner entirely. There are no contracts to buy or sell and no future prices to consider. The market is simply determined by what one party is willing to purchase something for.

Spot Market vs Futures Market
Spot Market

 Futures Market
No contracts to buy or sell Contracts are bought and sold outlining future prices
Trades occur instantly Trades may never actually occur at all
Non-speculative Speculative by nature

Another important concept to understand is contango and backwardation, which are ways to characterize the state of futures markets based on the relationship between spot and future prices. Some background knowledge on those concepts can help guide your investing strategy.

Note, too, that some investors may be confused by the concepts of margin trading and futures contracts. Margin and futures are two different concepts, and don’t necessarily overlap.


💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.

Example of a Spot Market

Consider the spot and futures markets for precious metals.

Precious-metal prices that investors see on financial news networks will most often be the current futures price as determined by COMEX. This market price is easy to quote. It’s the sum of all futures trading happening on one central exchange or just a few central exchanges.

The spot market is more difficult to pin down. In this case, the spot market could be generally referred to as the average price that a person would be willing to pay for a single ounce of gold or silver, not including any premiums charged by sellers.

Sometimes there is a difference between prices in the futures market and spot market. The difference is referred to as the “spread.” Under ordinary circumstances, the difference will be modest. During times of uncertainty, though, the spread can become extreme.

Futures Market Manipulation

As for trying to define what spot price means, it’s important to include one final note on futures markets. This will illustrate a key difference between the two markets.

Recent high-profile cases brought by government enforcement agencies like the Securities and Exchange Commission and Commodities and Futures Trading Commission highlight the susceptibility of futures markets to manipulation.

Some large financial institutions have been convicted of engaging in practices that artificially influence the price of futures contracts. Again, we can turn to the precious-metals markets for an example.

During the third quarter of 2020, JP Morgan was fined $920 million for “spoofing” trades and market manipulation in the precious metals and U.S. Treasury futures markets. Spoofing involves creating large numbers of buy or sell orders with no intention of fulfilling the orders.

Because order book information is publicly available, traders can see these orders, and may act on the perception that big buying or selling pressure is coming down the pike. If many sell orders are on the books, traders may sell, hoping to get ahead of the trade before prices fall. If many buy orders are on the books, traders may buy, thinking the price is going to rise soon.

Cases like this show that futures markets can be heavily influenced by market participants with the means to do so.

Spot markets, on the other hand, are much more organic and more difficult to manipulate.

3 Tips for Spot Market Investing

For those interested in trying their hand in the spot market, here are a few things to keep in mind.

1. Know What’s Going On

Often, prices in the spot market can change or be volatile in relation to the news or other current events. For that reason, it’s important that investors know what’s happening in the world, and use that to assess what’s happening with prices for a given asset or commodity.

2. Keep Your Emotions in Check

Emotional investing or trading is a good way to get yourself into financial trouble, be it in the spot market, or any other type of trading or investing. You’d likely do well to keep your emotions in check when trading or investing on the spot market, as a result.

3. Understand the Market

It’s also a good idea to do some homework and make a solid attempt at trying to understand the market you’re trading in. There may be jargon to learn, terms to understand, price discovery mechanisms that could otherwise be foreign to even a seasoned investor — do your best to do your due diligence.

The Takeaway

Spot markets are where commodities are traded, instantly. There are numerous types of spot markets, and there are numerous types of commodities that might be traded on them. Investors would be wise to know the basics of how they work, and come armed with a bit of background knowledge about the given commodity they’re trading, in order to reach their goals.

Spot market trading can be a part of an overall trading strategy, but again, investors should know the ropes a bit before getting in over their heads. It may be a good idea to speak with a financial professional before investing.

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

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

FAQ

What is spot market vs a futures market?

Trades on a spot market occur instantly, on the spot. Trades in the futures market involve contracts for commodities with prices outlined for some time in the future — if they occur at all.

What does spot market mean?

The term spot market refers to a financial market where assets or commodities are bought and sold by traders. The trades occur on the spot, or instantly, for immediate delivery.

What is the difference between spot market and forward market?

Forward markets involve trading of futures contracts, or transactions that take place at some point in the future, whereas spot market trades occur instantly, often for cash.

SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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


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.

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

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

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


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

*Borrow at 11%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Claw Promotion: Customer must fund their Active Invest account with at least $50 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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7 Tips for Maintaining the Value of Your Home

By | Budgeting & Goals, Home Ownership, personal_loan | Comments Off on 7 Tips for Maintaining the Value of Your Home

Actively maintaining your home can keep small repairs from turning into major (expensive) ones and can help enhance the value of your property. Whether you plan to sell in the near or far-off future, here are some simple (and relatively low-cost) ways to protect the value of your home over time.

Key Points

•   Regular home maintenance prevents small issues from becoming major, costly repairs.

•   Updating kitchen and bathrooms with current styles can boost home value.

•   Keeping the roof and exterior paint well-maintained is crucial.

•   Enhancing energy efficiency reduces utility bills and adds value.

•   Installing smart home technology makes properties more attractive to buyers.

Update, Update, Update

If a home that’s for sale has an updated anything, the real estate listing will scream it out in ALL CAPS. This can apply to appliances, cabinetry, countertops, flooring, bathroom remodels, kitchen remodels, and more.

If your kitchen is due for an update, try to keep in mind that this doesn’t necessarily mean stripping it to the studs and starting from scratch. A small kitchen update may do the trick. Are the cabinets in good shape? Consider a fresh coat of paint or stain to reflect the latest color trends.

In addition, something as simple as upgrading to matching appliances or installing a garbage disposal or water filtration system could help maintain value — even if they’re not top-of-the-line.

Also keep in mind that “update” means bringing the home’s aesthetics into line with current styles — replacing brass fixtures for brushed bronze, for example, or swapping out carpet for wood. For instance, a recent Zillow survey found that painting a kitchen graphite gray can boost the selling price of a property by more than $2,500.

Other, more expensive updates might adjust the actual layout of the home. If your current house only has one bathroom, is it possible to find a space for another half bath? Are there unused rooms or wasted space that could be updated to become more functional?

Recommended: 10 Small-Bathroom Remodel Ideas

Keeping Your Roof in Good Repair

Replacing a roof is costly, so it’s a good idea to do what you can to extend the life of your current roof as long as possible. A roof that shows signs of wear and tear can also be a big red flag to potential home buyers.

To maintain the value of your roof (and avoid other costly problems like leaks), you’ll want to replace any missing shingles or damaged areas as soon as possible. It’s also a good idea to have your roof cleaned regularly to remove any algae, moss, and mold that can damage the roof over time. Finally, be sure to get your gutters cleaned regularly so water can drain rather than collect on your roof.

Recommended: The Ultimate House Maintenance Checklist

Keeping Your Exterior Paint in Good Shape

Maintaining your home’s exterior paint not only helps your house look attractive and well cared for but also protects it from moisture. When paint starts peeling, water can find a way in, which can cause your siding to rot over time. Replacing sections of your siding can end up being a much costlier project than periodically freshening up your paint.

It’s a good idea to give your exterior paint job a look-over once a year to see if you any areas may need attention. This can help your paint job last longer and save money in the long run.

Pruning Your Trees and Shrubs

Maintaining your yard is a lot of work if you do it yourself and costly if you hire a landscaper. But neglect can cause dead branches or an entire tree to fall in a heavy rain or wind storm, and can cause significant damage to your home. Overgrown shrubs can also bring unwanted bugs close to, and eventually inside, your home (more on that below).

It can be worth hiring a tree expert to evaluate and, if necessary, prune your trees once a year. You can regularly trim back hedges and bushes yourself or hire a landscaper to do the job.

Upgrading Energy Efficiency

Making your home more energy efficient is one of those goals that’s great not only if you’re selling, but also if you want to reduce spending on utility bills. And it doesn’t just mean big investments like switching to solar or wind-powered energy. Making your home more energy efficient can also be as simple as replacing bad weather seals, ensuring that the attic has sufficient insulation, paying attention to the air and heating systems, and using energy-efficient light bulbs and appliances.

Upgrading the energy efficiency of your home is something that might even be rolled in with another project, such as maintenance or updating.

Installing Smart Tech

Even if your home is more than 100 years old, adding smart tech can make your property future-ready. Smart home devices (like Nest systems) and apps can also allow you to remotely control your heating and air temperatures, make sure the oven is actually turned off, and even give you a sense of security with security systems or video door bells.

While some types of home tech are hard-wired into the house and others are more portable, even being able to say “wired for surround sound” can be a bonus on a home listing.

Smart home tech is not only quickly becoming a must-have for many homebuyers, adding it to your home can be a perk even if you have no immediate plans to move.

Recommended: What Are Common Uses for Personal Loans?

Keeping the Bugs at Bay

One important job that comes with homeownership is keeping unwanted critters outside where they belong. Public enemy No. 1 in this category? Termites. They can wreak havoc on a home’s wood structures leading to costly repairs.

The problem is so widespread that some home loan companies require buyers to get a “termite letter,” which is basically a guarantee that the home is free from termite damage.

DIY recommendations for keeping the pests at bay can also check off items on the home maintenance list, including keeping gutters and downspouts flowing, filling in any places where water pools around the home or in the yard, filling in cracks in the foundation, pruning shrubbery close to the home, and keeping air vents free and clear.

Beyond termites, there are a variety of other living creatures that can cause damage to a home or surrounding property, including attic squatters like mice or raccoons, carpenter bees, moles, mosquitoes, and even grasshoppers that brunch on beautiful landscaping. Eliminating these pests can be an important step in maintaining the value of your home.

Recommended: What Are the Most Common Home Repair Costs?

Making Improvements Affordable

While some home maintenance projects are relatively low-cost, others require a more significant investment. Before sinking a lot of money into a home maintenance or improvement project, it can be a good idea to use an online home project value estimator that can help determine whether it’s a smart investment.

If you decide to move forward on the project, you’ll want to get estimates from at least three different contractors. Once you know the cost of the project, your next question may be, how are you going to pay for it?

For a small to midsize home maintenance project, you might consider using a home improvement loan. Unlike a home equity loan, these are unsecured personal loans — meaning your home isn’t used as collateral to secure the loan. Lenders decide how much to lend to you and at what rate based on your financial credentials, such as your credit score, income, and how much other debt you have.

With a home improvement personal loan, you receive a lump sum of cash up front you can then use to cover the costs of your home project. You repay the loan (plus interest) in regular installments over the term of the loan, which is often up to seven years.

The Takeaway

Maintaining your property is an important part of being a homeowner. It can help your home function better, be more comfortable for you and your family, and also maintain or increase the value of your investment. A personal loan can be a valuable way to finance home maintenance projects.

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.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What lowers property value the most?

Among the main issues that lower property value are deferred maintenance, poorly done home improvements, and outdated kitchens and baths.

How can I maintain my house’s value?

To maintain your house’s value, clean and declutter; update kitchen and baths; paint as needed; and work on curb appeal and energy efficiency.

What adds the biggest value to a house?

While the feature that adds the biggest value to a house will vary with each property, typically, a new kitchen and/or bathrooms and an attic or basement remodel will add the most to a home’s potential price tag.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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


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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®


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