Apr
02
2024

How to Invest in Silver

By | Growing Wealth, invest, Investing | Comments Off on How to Invest in Silver

For millennia, humans have used precious metals such as silver as a way to barter and exchange value. And even in today’s modern economy, many people believe that there is room for investing in silver and other precious metals as a way to diversify their overall portfolio.

Investing in silver can come in many different ways, from buying stocks or mutual funds focused on precious metals to holding the actual silver metal yourself. Depending on how you are investing in silver, it can be considered a valuable hedge against inflation and one way to diversify your overall investment portfolio.

Why Is Silver Considered Valuable?

Silver is a type of alternative investment, in that it’s different from a conventional stock or other type of security. And similar to how those types of securities or investments hold value, silver does as well.

At its most basic, silver is valuable for the same reason that anything is considered “valuable” — because we as a society have decided that it is valuable. Silver has been used for making coins and jewelry since the early days of history, which is one reason that silver is considered valuable. Silver is also quite conductive, which means that it has uses in industry as well.

Silver has many of the same qualities as gold, which is why many investors have similarly looked for different ways to invest in precious metals.

Silver vs Gold

Silver and gold have both been used as currency and jewelry since nearly the beginning of human civilization. They are both considered valuable precious metals and useful for portfolio diversification and as an inflation hedge. Deciding whether to invest in gold or invest in silver is in some ways a personal choice, and many investors decide to invest in both.

💡 Quick Tip: While investing directly in alternative assets often requires high minimum amounts, investing in alts through a mutual fund or ETF generally involves a low minimum requirement, making them accessible to retail investors.

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What Are the Advantages of Investing in Silver?

One of the biggest advantages of investing in silver is that it can help diversify your portfolio. The rate of return for silver and other precious metals is not always correlated with that of other investments, which means that it can be a useful form of portfolio diversification. Silver is also cheaper than gold on a per-ounce basis.

Many investors also consider investing in precious metals to be an inflation hedge – it’s commonly believed that precious metals like silver or gold hold their value more efficiently or for a longer-term than cash or other assets.

If you invest in actual physical silver, another advantage is that it is a hard asset — it cannot be hacked or erased. Silver and other precious metals are one of the few investments that you can actually hold in your hand. Unlike other investments, your holdings in silver can also be as private as you want them to be.

What Are the Potential Drawbacks?

One drawback of investing in silver is that its price is considered fairly volatile. That doesn’t make it a great investment if you are only holding for the short-term. Prices for precious metals can fluctuate wildly over the short-term, and even over the long-term, may not provide investors with the type of appreciation they may have seen if they had invested in other assets.

Further, if you hold physical silver, you do run the risk of having it stolen. Unlike digital assets, physical silver may not be recoverable if it is lost or stolen. As such, if you are buying physical silver coins or bars, you will need to find a safe and secure way to store them.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Is Silver an Inflation Hedge?

As noted, investing in precious metals is often considered an inflation hedge.

Inflation is a natural phenomenon that gradually increases the cost of many goods and services. Silver has many uses – it can be used to mint coins, for instance, and be used as an actual currency, or be incorporated into other products. For that reason, it may hold its value more effectively than cash or other assets.

But there’s no guarantee that silver will always be an effective inflation hedge, and it’s important to remember that it’s a volatile asset.

How Can I Invest in Silver?

There are a number of different ways to invest in silver, depending on what you’re looking for in your portfolio. One popular way to invest in silver is by buying physical bars or coins of silver. Another possible way to invest in silver is by investing in the stocks of silver mining companies.

Silver Funds

It may also be possible to invest in silver using various types of funds, such as exchange traded funds (ETFs) that own silver or silver mining companies. There may also be options for investors to invest in mutual funds with concentrations in the silver industry or market, too – doing a bit of research to see what your options are in relation to silver investments is likely to yield results.

The Takeaway

Investing in silver offers investors a way to add an alternative asset to their portfolio, which can help them diversify, and hedge against inflation. There are many ways to invest in silver — including investing in silver mining companies, silver ETFs or owning physical silver like coins or silver bullion.

But investing in silver has its risks, and investing in precious metals typically means investors are okay with adding a relatively volatile asset to their portfolios. As always, if you have questions, it may be a good idea to speak with a financial professional.

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

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Does owning silver diversify your portfolio?

Depending on the composition of your investment portfolio, owning silver can diversify your portfolio. Silver and other precious metals are often considered an inflation hedge, meaning that their price generally holds its value, regardless of the inflation rate. The rate of return on investing in silver and other precious metals is also not often correlated with returns of other types of investments, like the stock market or real estate.

Will the price of silver always go up?

Like all investments, there is no guarantee that the price of silver will always go up. The price of silver can fluctuate wildly, which means that depending on when you buy and/or sell, you may lose money. Before investing in silver, make sure you understand the risks and drawbacks of silver investing.

What are some alternative metals to silver?

Probably the most popular alternative precious metal to silver is gold. Like silver, gold has been used in currency and jewelry for most of the length of human civilization. Other options for investing in precious metals if you’d rather not own gold or silver are platinum or titanium.

Photo credit: iStock/oatawa

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

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


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.

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

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

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Apr
02
2024

Can a Roth IRA Be Used for College Expenses?

By | Going to College, invest, Investing | Comments Off on Can a Roth IRA Be Used for College Expenses?

A Roth IRA can be used to pay for college expenses, and it is possible to do so without incurring taxes or penalties. However, there are disadvantages of using a Roth IRA for college, and it’s important to weigh the pros and cons.

A Roth IRA is designed to help individuals save for retirement. While you can also use a Roth IRA for college expenses, you’ll want to understand the potential ramifications.

Here’s what you need to know about using a Roth IRA for college, plus other college savings options, to help make the best decision for your situation.

Can You Use a Roth IRA for College?

You can use a Roth IRA to help pay for college. However, as mentioned, a Roth IRA is primarily a vehicle for saving for retirement. You contribute after-tax dollars to the account (meaning you pay taxes on the contributions in the year you make them), and the money in the Roth IRA grows tax-free. You can generally withdraw the funds tax-free starting at age 59 ½. However, if you withdraw the money early, you may be subject to a 10% penalty.

But there are some ways to make early withdrawals from your Roth IRA to help pay for college without being penalized. Because you contribute to a Roth IRA with after-tax dollars, you can withdraw the contributions (but not the earnings) you’ve made to a Roth at any time without paying a penalty. You could then use those contributions to help pay for college.

Just be aware that there are annual contribution limits to a Roth IRA. In tax year 2023, you can contribute up to $6,500 (or $7,500 if you’re 50 or older), and in 2024 you can contribute up to $7,000 ($8,000 for those 50 or older). How much you’ve contributed will affect how much you have in contributions to withdraw, of course.

Another way to use a Roth IRA to pay for college without being penalized is by taking advantage of one of the Roth IRA exceptions that allow you to withdraw money from your account early. One of the exceptions is for qualified higher education expenses.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

Do You Have To Pay Penalties if You Use a Roth IRA for College?

Typically, if you take out money from your Roth IRA before age 59 ½ , you will be subject to taxes and penalties. However, IRA withdrawal rules grant a few exceptions to this rule, and one of the exceptions is for qualified higher education expenses.

If you pay qualifying higher education expenses to a qualified higher education institution for your child, yourself, your spouse, or your grandchildren, you won’t have to pay the 10% penalty for withdrawing funds from a Roth IRA. Qualified higher education expenses include things like tuition, fees, books and supplies. However, you will still have to pay taxes on any earnings you withdraw from your Roth IRA.

Pros and Cons of Using a Roth IRA for College

Whether using a Roth IRA for college is right for you depends on your particular situation. Here are the pros and cons you’ll want to consider.

Pros of Tapping Into a Roth IRA for College

Advantages of using a Roth IRA for college expenses include:

•   You might not have to borrow as much money to pay for college. Using a Roth IRA for college expenses may reduce the need for student loans. And for some students, using money from a Roth IRA might make the difference between being able to afford to attend college or not.

•   You won’t be penalized for withdrawing the money. Because of the exception for qualified higher education expenses, you can take out the money to pay for those expenses without having to pay the 10% penalty.

•   If you withdraw just your contributions, you won’t owe taxes on that money.

Cons of Tapping Into a Roth IRA for College

These are the drawbacks of using a Roth IRA to pay for college:

•   Your retirement savings will take a hit. This is the biggest disadvantage of using the money in a Roth IRA for college. While there are other ways to help cover the cost of college, there are generally fewer options to help you save for retirement if you spend your Roth IRA funds on college expenses.

•   Because of possible compounding returns, even a few thousand dollars withdrawn from your Roth IRA today might mean missing out on tens of thousands of dollars of potential growth by the time you’re ready to retire years from now.

•   Eligibility for financial aid could be affected. Another possible downside of using a Roth IRA for college is that the money you withdraw generally counts as income on the FAFSA (Federal Application for Federal Student Aid). That may limit financial aid you could receive, including grants and loans.

Roth IRA vs 529 for College

Before you decide to use a Roth IRA for college savings, you might want to consider a 529 plan. With a 529, you can save money for your child to go to college and withdraw the funds tax-free as long as they’re used for qualified higher education expenses.

A 529 plan has more generous contribution limits than a Roth IRA does, and other extended family members may also contribute to the plan. In addition, while 529 contributions aren’t deductible at the federal level, many states provide tax benefits for 529s.

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

Which College Expenses Can a Roth IRA Be Used For?

According to the IRS, a Roth IRA can be used to pay for qualified higher education expenses. These qualified expenses include tuition, fees, books and supplies, and equipment required for enrollment or attendance.

The Takeaway

It’s possible to use a Roth IRA to help pay for qualified higher education expenses, and you typically won’t be subject to a penalty for doing so. However, taking funds out of your Roth IRA means you won’t have that money available for retirement. You’ll also lose out on any gains that may have compounded throughout the years. That could impact your retirement savings or even delay your retirement date.

Instead of using a Roth IRA for college, you may want to consider other ways to save for college that might better fit your financial needs, such as a 529 plan. That way you can save for both college and retirement.

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

Help grow your nest egg with a SoFi IRA.

FAQ

Can you use a Roth IRA for college?

Yes, it is possible to use a Roth IRA for college expenses. If you withdraw money from a Roth IRA for qualified higher education expenses, you generally will not be subject to the 10% early withdrawal penalty. Tuition, fees, books, supplies, and equipment needed for enrollment or attendance are usually considered qualified expenses.

Is a Roth IRA better than a 529 for college?

Deciding whether to use a 529 plan or a Roth IRA for college will depend on your specific financial situation. In many cases, a 529 plan may make more sense than a Roth IRA for college savings. You can generally contribute more to a 529 plan each year than you can to a Roth IRA, there are tax advantages to the plan, and other relatives can also contribute to it. Plus, by using a 529, you won’t be taking money from your retirement savings.

Can I withdraw from my IRA for college tuition without penalty?

Yes, you can use a Roth IRA to pay for college tuition without penalty in most cases because tuition is generally considered a qualified higher education expense. However, to avoid taking money from your retirement savings, you may want to consider other college saving options instead, such as a 529 plan.

Photo credit: iStock/Tempura

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.

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

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

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

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

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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Apr
01
2024

Private Credit vs. Private Equity: What’s the Difference?

By | Family Finances, invest, Investing | Comments Off on Private Credit vs. Private Equity: What’s the Difference?

Private credit and private equity investments offer investors opportunities to build their portfolios in substantially different ways. With private credit, investors make loans to businesses and earn returns through interest. Private equity represents an ownership stake in a private company or a public company that is not traded on a stock exchange.

Each one serves a different purpose, which can be important for investors to understand.

What Does Private Credit and Private Equity Mean?

Private equity and private credit are two types of alternative investments to the stocks, bonds, and mutual funds that often make up investor portfolios. Alternative investments in general, and private equity or credit in particular, can be attractive to investors because they can offer higher return potential.

However, investors may also face more risk.

💡 Quick Tip: While investing directly in alternative assets often requires high minimum amounts, investing in alts through a mutual fund or ETF generally involves a low minimum requirement, making them accessible to retail investors.

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.

Private Credit Definition

Private credit is an investment in businesses. Specifically, an investor or group of investors extends loans to private companies and delisted public companies that need capital. Investors collect interest on the loan as it’s repaid. Other terms used to describe private credit include direct lending, alternative lending, private debt, or non-bank lending.

Who invests in private credit? The list can include:

•   Institutional investors

•   High-net-worth individuals

•   Family offices or private banks

Retail investors may pursue private credit opportunities but they tend to represent a fairly small segment of the market overall. Private credit investment is expected to exceed $3.5 trillion globally by 2028.

Private Equity Definition

Private equity is an investment in a private or delisted public company in exchange for an ownership share. This type of investment generates returns when the company is sold, or in the case of a private company, goes public.

Similar to private credit, private equity investments are often the domain of private banks, or high-net-worth individuals. Private equity firms can act as a bridge between investors and companies that are seeking capital. Minimum investments may be much higher than the typical mutual fund buy-in, with investors required to bring $1 million or more to the table.

Private equity is often a long-term investment as you wait for the company to reach a point where it makes sense financially to sell or go public. One difference to note between private equity and venture capital lies in the types of companies investors target. Private equity is usually focused on established businesses while venture capital more often funds startups.

What Are the Differences Between Private Credit and Private Equity?

Private credit and private equity both allow for investment in businesses, but they don’t work the same way. Here’s a closer look at how they compare.

Investment Returns

Private credit generates returns for investors via interest, whereas private equity’s goal is to generate returns for investors after selling a company (or stake in a company) after the company has grown and appreciated, though that’s not always the case.

With private credit, returns may be more predictable as investors may be able to make a rough calculation of their potential returns. Private equity returns are less predictable, as it may be difficult to gauge how much the company will eventually sell for. But there’s always room for private equity returns to outstrip private credit if the company’s performance exceeds expectations. However, it’s important to remember that higher returns are not guaranteed.

Risk

Investing in private credit carries liquidity risk, in that investors may be waiting several years to recover their original principal. That risk can compound for investors who tie up large amounts of capital in one or two sectors of the market. Likewise, changing economic conditions could diminish returns.

If the economy slows and a company isn’t able to maintain the same level of revenue, that could make it difficult for it to meet its financial obligations. In a worst-case scenario, the company could go bankrupt. Private credit investors would then have to wait for the bankruptcy proceedings to be completed to find out how much of their original investment they’ll recover. And of course, any future interest they were expecting would be out the window.

With private equity investments, perhaps the biggest risk to investors is also that the company closes shop or goes bankrupt before it can be sold but for a different reason. In a bankruptcy filing, the company’s creditors (including private credit investors) would have the first claim on assets. If nothing remains after creditors have been repaid, private equity investors may walk away with nothing.

The nature of the company itself can add to your risk if there’s a lack of transparency around operations or financials. Privately-owned companies aren’t subject to the same federal regulation or scrutiny as publicly-traded ones so it’s important to do thorough research on any business you’re thinking of backing.

Ownership

A private credit investment doesn’t offer any kind of ownership to investors. You’re not buying part of the company; you’re simply funding it with your own money.

Private equity, on the other hand, does extend ownership to investors. The size of your ownership stake can depend on the size of your investment.

Investor Considerations When Choosing Between Private Credit and Private Equity

If you’re interested in private equity or private credit, there are some things you may want to weigh before dividing in. Here are some of the most important considerations for adding either of these investments to your portfolio.

•   Can you invest? As mentioned, private credit and equity are often limited to accredited investors. If you don’t meet the accredited investor standard, which is defined by income and net worth, these investments may not be open to you.

•   How much can you invest? If you are an accredited investor, the next thing to consider is how much of your portfolio you’re comfortable allocating to private credit or equity.

•   What’s your preferred holding period? When evaluating private credit and private equity, think about how long it will take you to realize returns and recover your initial investment.

•   Is predictability or the potential for higher returns more important? As mentioned, private credit returns are typically easy to estimate if you know the interest rate you’re earning. However, returns may be lower than what you could get with private equity, assuming the company performs well.

Here’s one more question to ask: how can I invest in private equity?

These investments may not be available in a standard brokerage account. If you’re looking for private credit opportunities you may need to go to a private bank that offers them. When private equity is the preferred option, a private equity firm is usually the connecting piece for those investments.

When comparing either one, remember to consider the minimum initial investment required as well as any fees you might pay.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

The Takeaway

Private credit and private equity can diversify a portfolio and help you build wealth, though not in the same way. Comparing the pros and cons, assessing your personal tolerance for risk and ability to invest in either can help you decide if alternative investments might be right for you.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Why do investors like private credit?

Private credit can offer some unique advantages to investors, starting with predictable returns and steady income. The market for private credit continues to grow, meaning there are more opportunities for investors to add these types of investments to their portfolios. Compared to private equity, private credit carries a lower degree of risk.

How much money do you need for private equity?

The minimum investment required for private equity can vary, but it’s not uncommon for investors to need $100,000 or more to get started. In some instances, private equity investment minimums may surpass $1 million, $5 million, or even $10 million.

Can anyone invest in private credit or private equity?

Typically, no. Private credit and private equity investments most often involve accredited investors or legal entities, such as a family office. It’s possible to find private credit and private equity investments for retail investors, however, you may need to meet the SEC’s definition of accredited to be eligible.

Photo credit: iStock/shapecharge

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

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

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


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.

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Mar
27
2024
Should I Sell My House? Reasons to Sell (or Wait) in 2021

Should I Sell My House? Reasons to Sell (or Wait) in 2024

By | Home Ownership, relay | Comments Off on Should I Sell My House? Reasons to Sell (or Wait) in 2024

The housing market has been super-heated in recent years since the pandemic and the popularity of working from home sent ripples across America. After several months of hikes, mortgage rates are expected to fall in 2024, and an increase in home sales may follow.

You may be wondering if this is the year to sell your home, or would it be wise to wait another year or two? That’s not a simple yes/no decision. A variety of factors come into play when making a big lifestyle and financial move like this one.

Here, we’ll provide guidance on how to size up the pros and cons of selling now, including:

•   What is the housing market like in 2024?

•   What are good reasons to sell your house?

•   What are good reasons to wait to sell your house?

•   Should I sell my house now or wait? If so, what are selling tips?

•   Should I buy a house in 2024?

Examining the Housing Market in 2024

The coronavirus pandemic brought an unprecedented demand for housing as more people needed houses that would accommodate the shift to working from home as well as kids shifting to the remote-learning model. The housing market heated up, also fueled by low mortgage interest rates.

Fast forward to today, when many people are heading back to the office, children are back at school, and mortgage rates and the annual percentage yield (APYs) on mortgages have climbed. This has occurred in sync with the Fed raising their rates with an eye to slowing inflation.

What does that mean for the housing market in 2024? It may be softer than at its white-hot peak, but it is still largely a seller’s market, with home prices expected to continue slowly rising in many markets.

So to summarize: Houses were selling like hotcakes throughout the pandemic and demand remains strong in many areas. This could provide a good opportunity to sell your house in some situations. But if you’re selling so you can buy another house, there’s more to dig into local market conditions in order to answer the question, “Should I sell my house now?”


💡 Quick Tip: An online property tracker can help you monitor your home equity over time. That’s important for understanding your net worth and finding sufficient insurance protection.

3 Reasons to Sell Your House

Now could be the smartest time to sell your house, depending on your specific situation. Here are some compelling reasons to sell your house in 2024.

Reason #1: Your House is Worth More Now

Housing prices spiked recently, and now they are dropping. In other words, your home is likely worth more than several years ago and possibly less than it will be in a year or two.

If, due to the spike in value, you discover that how much equity you have in your home is significantly higher, it could be a great time to cash out and buy something else. Or, if you know you want to sell within the next year or two, it might be wise to make a move now since property values may slip lower in the near future.

Recommended: How Much Is My House Worth?

Reason #2: A Few Minor Repairs Could Increase Value

Even if your home is already worth more than in the past, you can get even more value out of it if you make common home repairs like replacing pipes or a water heater.

Also consider revamping your kitchen or bathrooms, since those are big influencers for people looking for a new home. A fresh coat of paint can breathe new life into your home and make it all the more appealing if you put it on the market.

Reason #3: Houses are Selling Fast

Looking to sell quickly? Now could be a good time. In 2024, the median time a home is on the market is 61 days, according to Fred Economic Data. By comparison, homes were typically on the market for 83 days in 2023.

At the start of the year, homes were typically on the market for two weeks longer than a year prior, but that still represents a quicker sale than pre-pandemic norms. So if you do decide to sell your property, be prepared to have to move out quickly and make sure you have a plan for where you’ll live next.

3 Reasons You Should Wait to Sell Your House

While there are some great reasons to sell your home right now, it may not be the right time to sell for everyone. Here’s why you might want to wait.

Reason #1: You Can’t Afford to Buy

Selling in a seller’s market is great…but not so great if you need to buy another house, especially if you’re staying in the same area. Buying a house may be cost-prohibitive for you, especially when you factor in closing costs on top of the inflated pricing.

Also, there’s no avoiding the fact that it has become more expensive to borrow money. As of mid-May 2024, the average mortgage rate for a 15-year fixed-rate mortgage was 6.21% versus 5.89% in January of 2024.

That said, if you live in an expensive area, you could sell your home and move to another more affordable state. Or you might look into different mortgage loan products and options (for instance, buying down your rate by paying points) to make a move less cost-prohibitive.

Recommended: How Much House Can I Afford?

Reason #2: You Owe More Than You Could Sell For

If you are upside-down on your mortgage payments though, selling won’t provide a solution. Perhaps you took out a second mortgage or not have paid enough on your first mortgage to recoup the expense by selling, even at a higher price. That means you would still owe money on a house you no longer live in after selling.

If this is the case, it may be better to build equity over time before selling.

Reason #3: You’re Not Ready to Make Home Repairs

While making home repairs before selling could help you get a higher price for your home, that doesn’t necessarily mean you have $30,000 lying around to make those improvements. If you know that certain repairs would help you get more for your house but you can’t afford to make them right now, it may be better to wait to sell a house until you can afford to invest in those home improvements.

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Tips for Selling (and Buying) a Home

Before coming up with your own answer to the question of “Should I sell my house,” consider these points:

•   Figure out how much you can afford to pay to buy another. If you can only afford a house that’s smaller than your current one, or in a neighborhood you don’t want to live in, there’s not much point in selling only to end up worse off.

•   Look at comparables to understand market trends and how much homes are selling for in your neighborhood. Go to open houses to see what sort of updates and features sellers are offering so you have an idea of what to do to get your own house ready for sale.

•   Contemplate being represented by a real estate agent or doing it yourself. There are some great DIY sites that can cut down on the fees you pay to sell, but you will probably have to invest time, effort, and cash into marketing your property.

For instance, if you’re selling your house on your own, invest in professional photos rather than taking your own, and get the house staged (that means more than just removing all the toys and dog beds before a showing!). The better you present your home, the better the price you can command.

•   Remain patient if you’re also buying. It can feel frustrating to be outbid for what seems like the house of your dreams, but it can be a reality right now. Don’t force a decision — the right house will find you.



💡 Quick Tip: Planning a home improvement project? Some upgrades provide more value than others. A midlevel-budget kitchen or bath remodel, for example, can provide a decent return on investment.

The Takeaway

Selling your house this year could be a smart financial decision, but it’s important to make sure you’re looking at the bigger picture with your finances.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

Photo credit: iStock/AlexSecret

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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Mar
25
2024
What Is a Returned Item Fee (NSF Fee)?

Returned Item Fees: What They Are & How to Avoid Them

By | Budgeting & Goals, Financial Independence, money | Comments Off on Returned Item Fees: What They Are & How to Avoid Them

Returned item charges are bank fees that are assessed when you don’t have enough money in your account to cover a check (or online payment) and the bank doesn’t cover that payment. Instead, they return the check or deny the electronic payment, and hit you with a penalty fee. Returned item fees are also called non-sufficient funds (NSF) fees. While these fees used to be ubiquitous, some banks have chosen to eliminate them.

Read on to learn exactly what NSF/returned item fees are and how you can avoid paying them.

What Is a Non-Sufficient Funds (NSF) Fee?

A non-sufficient fund or NSF fee is the same thing as a returned item fee. These are fees banks charge when someone does not have enough money in their checking account to cover a paper check, e-check, or electronic payment. They are assessed because the bank has to put forth additional work to deal with this situation. They also serve as a way for banks to make money. The average NSF fee is $19.94.

In addition to being hit with an NSF fee from the bank, having bounced checks and rejected electronic payments can cause you to receive returned check fees, late fees, or interest charges from the service provider or company you were attempting to pay.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do Non-Sufficient Fund Fees Work?

Here’s a basic example. Let’s say that someone has $500 in the bank. They withdraw $100 from an ATM and forget to record that transaction. Then, they write a check for $425, believing that those funds are available:

•   Original balance: $500

•   ATM withdrawal: $100

•   New actual balance: $400

•   Check amount: $425

•   Problem: The check is for $25 more than what is currently available.

The financial institution could refuse to honor this check (in other words, the check would “bounce” or be considered a “bad check”) and charge an NSF fee to the account holder. This is not the same thing as an overdraft fee.

An overdraft fee comes into play when you sign up for overdraft protection. Overdraft protection is an agreement with the bank to cover overdrafts on a checking account. This service typically involves a fee (called an overdraft fee) and is generally limited to a preset maximum amount.

Are NSF Fees Legal?

Yes, NSF or returned item fees are legal on bounced checks and returned electronic bill payments. However, they should not be charged on debit card transactions or ATM withdrawals.

If you don’t opt in to overdraft coverage (i.e., agree to pay overdraft fees for certain transactions), then the financial institution cannot legally charge overdraft (or NSF) fees for debit card transactions or ATM withdrawals. Instead, the institution would simply decline the transaction when you try to make it.

No federal law states a maximum NSF fee. But The Truth in Lending Act does require banks to disclose their fees to customers when they open an account.

The Consumer Financial Protection Bureau has been pushing banks to eliminate NSF fees, and their efforts have paid off. Many banks have done away with NSF fees and others have lowered them.

Are NSF Fees Refundable?

You can always ask for a refund. If you’ve been with a financial institution for a while and this is your first NSF fee, you could contact the bank and ask for a refund. The financial institution may see you as a loyal customer that they don’t want to lose, so they may say “yes.” That said, it’s entirely up to them — and, even if they agree the first time, they will probably be less willing if it becomes a pattern. (Or, they may say “no” to the very first request.)

Recommended: Common Bank Fees and How to Avoid Them

Do NSF Fees Affect Your Credit?

Not directly, no. Banking history isn’t reported to the consumer credit bureaus. Indirectly, however, NSF fees could hurt your credit. If a check bounces — say, one to pay your mortgage, car payment, credit card bill, or personal loan — this may cause that payment to be late. If payments are at least 30 days late, loans and credit cards can be reported as delinquent, which can hurt your credit.

And if a payment bounces more than once, a company might send the bill to a collections agency. This information could appear on a credit report and damage your credit. If you don’t pay your NSF fees, the bank may send your debt to a collection agency, which could be reported to the credit bureaus.

Also, keep in mind that any bounced checks or overdrafts could be reported to ChexSystems, a banking reporting agency that works similarly to the credit bureaus. Too many bounced checks or overdrafts could make it hard to open a bank account in the future.

What Happens if You Don’t Pay Your NSF Fees?

If you don’t pay your NSF fees, the bank could suspend or close your account and report your negative banking history to ChexSystems. This could make it difficult for you to open a checking or savings account at another bank or credit union in the future. In addition, the bank may send your debt to a collection agency, which can be reported to the credit bureaus.

How Much Are NSF Fees?

NSF were once as high as $35 per incident but have come down in recent years. The average NSF is now $19.94, which is an historical low.

When Might I Get an NSF Fee?

NSF fees can be charged when there are insufficient funds in your account to cover a check or electronic payment as long as the bank’s policy includes those fees.

Recommended: Negative Bank Balance: What Happens to Your Account?

What’s the Difference Between an NSF and an Overdraft Fee?

An NSF fee can be charged if there aren’t enough funds in your account to cover a transaction and no overdraft protection exists. The check or transaction will not go through, and the fee may be charged.

Some financial institutions, though, do provide overdraft protection. If you opt in to overdraft protection and you have insufficient funds in your account to cover a payment, the bank would cover the amount (which means there is no bounced check or rejected payment), and then the financial institution may charge an overdraft fee. So with overdraft, the transaction you initiated does go through; with an NSF or returned item situation, the transaction does not go through and you need to redo it. Fees may be assessed, however, in both scenarios.

How to Avoid NSF Fees

There are ways to avoid overdraft fees or NSF fees. Here are some strategies to try.

Closely Watch Your Balances

If you know your bank balance, including what’s outstanding in checks, withdrawals, and transfers, then a NSF situation shouldn’t arise. Using your bank’s mobile app or other online access to your accounts can streamline the process of checking your account. Try to get in the habit of looking every few days or at least once a week.

Keep a Cushion Amount

With this strategy, you always keep a certain dollar amount in your account that’s above and beyond what you spend. If it’s significant enough, a minor slip up still shouldn’t trigger an NSF scenario.

💡 Quick Tip: If your checking account doesn’t offer decent rates, why not apply for an online checking account with SoFi to earn 0.50% APY. That’s 7x the national checking account average.

Set Up Automatic Alerts

Many financial institutions allow you to sign up for customized banking alerts, either online or via your banking app. It’s a good idea to set up an alert for whenever your balance dips below a certain threshold. That way, you can transfer funds into the account to prevent getting hit with an NSF fee.

Link to a Backup Account

Your financial institution may allow you to link your savings account to your checking account. If so, should the checking balance go below zero, they’d transfer funds from your savings account to cover the difference.

Use Debit Cards Strategically

If you use your debit card to rent a car or check into a hotel, they may place a hold on a certain dollar amount to ensure payment. It may even be bigger than your actual bill. Depending upon your account balance, this could cause something else to bounce. So be careful in how you use your debit cards.

Look for No-Fee Overdraft Coverage

You can avoid NSF fees by shopping around for a bank that offers no-fee overdraft coverage.

The Takeaway

Returned item fees (also known as NSF fees) can be charged when there are insufficient funds in your account to cover your checks and electronic payments. When you get hit with an NSF fee, you’re essentially getting charged money for not having enough money in your account — a double bummer. To avoid these annoying fees, keep an eye on your balance, know when automatic bill payments go through, and try to find a bank that does not charge NSF fees.

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

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

FAQ

What happens when you get an NSF?

If you get charged an non-sufficient funds (or NSF) fee, it means that a financial transaction has bounced because of insufficient funds in your account. You will owe the fee that’s listed in your bank’s policy.

Is an NSF bad?

If a financial transaction doesn’t go through because of insufficient funds, then this can trigger returned item charges (NSF fees). This means you’re paying a fee for not having enough money in your account to cover your payments, a scenario you generally want to avoid.

Does an NSF affect your credit?

An NSF fee does not directly affect your credit, since banking information isn’t reported to the consumer credit agencies. However, if a bounced check or rejected electronic payment leads to a late payment, the company you paid could report the late payment to the credit bureaus, which could impact your credit.

Photo credit: iStock/MicroStockHub

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

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

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

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

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

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

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

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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