Jan
10
2023
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How to Win a Bidding War

By | Growing Wealth, Home Ownership, mortgage | Comments Off on How to Win a Bidding War

In housing markets teeming with buyer demand, it’s not uncommon to put an offer on a home only to be outdone by a competing offer. If two or more potential buyers want a property badly enough, they may find themselves locked in a bidding war.

The tea leaves indicate that 2023 will throw cold water on many bidding wars, but certain markets in the country could remain competitive.

Here’s how to increase your chances of winning a bidding war so you don’t have to bid adieu to a home you really want.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

1. Know How a Bidding War Works

Bidding wars usually take place in a seller’s market, when demand outpaces housing inventory. They also typically occur when there are multiple interested parties and when there is some sort of constraint, like timing.

When a seller’s agent receives offers for a property that has attracted a lot of buzz, the agent may set a date by which would-be buyers should make their “highest and best” offer. Sellers can accept the best offer, counter one offer while putting the others to the side while awaiting a decision, or counter one offer and reject the others.

This brings up a salient point: It’s true that you can buy a house without a Realtor® or real estate agent, but an experienced agent can guide you through offers and counteroffers, contingency snags, and more.

2. Line Up Your Financing

One of the best things you can do to be prepared for a potential bidding war — or really any time — is to get your finances, and financing, in order.

Be sure to know how much house you can afford, including a down payment and monthly payments.

Determine if you qualify for a mortgage and familiarize yourself with the types of home loans that are available: government-backed loan or conventional loan, fixed rate or adjustable rate.

Getting preapproved for a mortgage will give you a specific amount that a lender is tentatively willing to let you borrow.

And a preapproval letter shows sellers that you are a serious candidate to buy a home. Many experts recommend getting at least three preapproval letters from three lenders.

3. Lessen or Drop Contingencies

Contingencies are certain conditions that must be met before a real estate deal becomes binding. Potential buyers can back out of a deal without penalty if the contingencies aren’t met.

A clean offer, one with as few contingencies as possible, is attractive to sellers in a competitive market.

In a typical real estate market, a common contingency is the mortgage contingency, or financing contingency, which allows homebuyers to exit the deal and have their earnest money returned if they cannot secure financing by the agreed-upon deadline.

Another is the inspection contingency. Based on the findings of a professional inspection, the buyer may be able to negotiate repairs or the price, which are known as seller concessions if the sellers are agreeable, or cancel the contract.

Waiving contingencies shows your eagerness to triumph, but it comes with risk. The biggest is losing your earnest money deposit if you hit a snag.

4. Be Quick About These Contingencies

Sellers want to avoid spending a lot of time with a potential buyer only to have the deal fall through. If you’re including appraisal and inspection contingencies, do what you can to expedite them.

The real estate purchase contract includes any contingencies, the sales price, the closing date, and the date of the title transfer and possession. The contract is considered a working document until both parties agree on the terms.

5. Use an Escalation Clause

Unsurprisingly, one of the best ways to win a bidding war is by offering more money.

You may want to include an escalation clause in the contract if you assume there will be multiple offers.

The clause asserts that if another buyer makes a competing offer, your bid will automatically increase by a certain amount, up to a limit, to exceed the offer.

Say you put a $400,000 offer on a home, with an escalation amount of $10,000 and a ceiling of $430,000. If someone else bids $410,000, you will automatically bid $420,000, up to your ceiling.

6. Stay Flexible

A willingness to be flexible can give you a leg up in the eyes of a seller.

For example, a seller might be moving across the country for work and need to close by a specific date. So if you can get the appraisal and inspection done swiftly, that could be a huge plus.

Alternatively, sellers may need to stay in the house for a while. Working with them on their specific needs could give you an edge.

7. Pay With Cash

If you are able to do it, buying a house with cash can be very attractive to sellers. The process is typically much faster than going through a lender, and sellers don’t want to worry about financing issues that might hold up the deal or cause it to fall through.

It’s even possible that a seller would choose a cash offer over a slightly higher offer backed by a mortgage.

8. Increase Your Deposit

There are timeless standards for how to make an offer on a house. One is determining the size of your earnest money deposit.

The deposit, held in escrow by the title company, secures the real estate contract. It tells the seller that you are serious about buying the house.

Earnest money is typically 1% to 3% of the purchase price but can be more in a competitive market. If you close on the home, the deposit will be applied to your closing costs.

9. Write a Personal Letter

When sellers are choosing a buyer during a bidding war, they’re often just looking at numbers on a page. Consider writing a real estate offer letter, aka love letter, to humanize the transaction.

You might want to make a case for why you’re the ideal candidate to buy the home, and note commonalities: You’re a ceramicist and noticed an artist’s studio in the backyard. You have dogs; they have a dog. That big elm reminds you of the one at your childhood home.

Be complimentary about the things you like about the house and how it has been maintained. And be concise.

The Takeaway

Whether you’re buying in a time of burgeoning bidding wars or not, it’s good to know how they work. The tactics help homebuyers understand the lay of the real estate land: contingencies, earnest money, escalation clauses, love letters.

If you’re gearing up for a bidding war or a peaceful purchase, see what SoFi Mortgages are all about. The rates are competitive. A number of repayment terms are offered. And qualifying first-time homebuyers can put as little as 3% down.

Getting prequalified is the first step.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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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.

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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Jan
06
2023
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Crypto Tax Guide 2023: How to Report Crypto on Your Taxes

By | Growing Wealth, invest, Investing | Comments Off on Crypto Tax Guide 2023: How to Report Crypto on Your Taxes

Make no mistake: You need to report your crypto activity on your tax return. Cryptocurrency has become very popular in recent years, and that hasn’t gone unnoticed by the IRS. If you were active in the crypto markets over the past year, you’ll need to report it on your tax return, or risk being penalized.

Because of this, it’s important that investors know the basics regarding filing and paying taxes on their cryptocurrency investments, which includes reporting their trading activity and income.

How Cryptocurrency Taxes Work

One of the most important things investors need to know before investing in cryptocurrency is how crypto taxes work. Additionally, investors should be aware that classification of cryptocurrencies varies depending on the federal government agency overseeing the investment activity.

The IRS defines cryptocurrencies as digital assets, and that includes non-fungible tokens (NFTs), and stablecoins, too. Despite the fact that crypto is often thought of as a currency, they are not considered currency for federal tax purposes.

Instead, transactions of cryptocurrencies are treated as property, like stocks, bonds, and other capital assets. So, when someone uses, sells, or is paid in a cryptocurrency, they are generally required to pay taxes on their realized gains.

Note, though, that even as the IRS treats cryptocurrencies as property for tax purposes, this categorization is not consistent across all federal government agencies.

The Commodity Futures Trading Commission (CFTC), for example, classifies cryptocurrencies as a commodity when regulating a variety of crypto-related trading markets. The CFTC oversees cryptocurrencies when they are “used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.”

In contrast, the U.S. Securities and Exchange Commission (SEC) attempts to regulate different cryptocurrencies as securities and investors can be subject to securities laws.

In all, there’s something of a turf war happening in Washington D.C. over crypto regulation. But for taxpayers, the most important thing to know is that crypto is considered “property” by the IRS, and investors will need to report it as such on their tax returns.

Do You Have to Pay Taxes on Crypto?

Investors are required to pay capital gain taxes on cryptocurrency when selling, trading, or disposing of their holdings. Additionally, cryptocurrencies can be taxed as income if an individual receives the crypto as a gift, from mining, or for services rendered. There are different types of income, and crypto income is among them.

So, there are two types of taxes potentially at play.

However, not all crypto transactions result in a tax liability. These nontaxable events include buying crypto with cash and holding it, donating it to a qualified charity or non-profit, or transferring crypto to yourself between wallets or accounts. In effect, investors need to realize a gain or loss.

Situations When You’ll Need to Pay Taxes on Crypto

•   Cryptocurrency is sold for cash: When an investor sells cryptocurrency for government-backed currency (fiat currency) and makes a profit, the investor will have to pay capital gains taxes on the proceeds, just as they would on the sale of a share of stock.

•   Cryptocurrency is used to purchase a good or service: If an individual uses their cryptocurrency to buy a new car or pay for a haircut, they will likely owe capital gains taxes on the purchase. To the IRS, using crypto to buy something is the same as selling it for cash, because the crypto needs to be sold for dollars before it can be used to exchange for a good or service. This creates a “realized” gain.

•   Exchanging cryptocurrencies: Converting or exchanging one crypto for another is comparable to selling the one to purchase the other. As a result, the investor may have to pay capital gains tax on the sale of the first crypto, if it was sold for a profit.

•   Being paid in cryptocurrency: If an individual decides to be paid in cryptocurrency, they will need to pay income taxes on that income (just as if they were being paid in dollars) which will depend on their individual tax bracket.

•   Mining cryptocurrency: The proceeds from mining Bitcoin and other cryptocurrencies are typically taxed as income. It’s also possible for the proceeds of some miners to be taxed as business income.

•   Crypto is acquired via an “airdrop” or “hard fork”: In the event of a crypto airdrop or hard fork that results in new coins, those new coins are taxed as income.

Is Crypto Investing Taxed as Income?

Crypto investing is taxed more or less the same way that investing in stocks, ETFs, or other securities is taxed. That is, tax liabilities are generated when an investor disposes of their holdings by selling or exchanging them. Only then do they have both a purchase price (cost basis) and a disposal price, which can be positive or negative ( a gain or a loss).

From there, capital gains taxes can be calculated, similar to how things work with traditional investment tax rules.

Crypto is taxed as income under a few select circumstances, as discussed. So, no, crypto investing itself isn’t taxed as income, but that doesn’t mean that crypto itself is never taxed as income.

How Much Do I Owe in Crypto Taxes?

The amount of crypto taxes owed varies depending on an investor’s income, tax filing status, and the length of time that an investor owned a crypto asset before selling it. Additionally, the type of crypto transaction affects what tax rate an individual will be charged. As mentioned above, some situations result in a capital gains tax liability, and others an income tax liability.

Long-Term Capital Gains Crypto Tax Rates for 2023

If an investor owned a cryptocurrency for more than 365 days before selling or using it, the proceeds of the transaction are taxed at the long-term capital gains tax rate. Here are the cryptocurrency capital gains rates on long-term gains for the 2022 tax year (taxes filed in 2023):

Long-Term Capital Gains Tax Rates for 2022
Tax Rate Single Married Filing Jointly Married Filing Separately Head of Household
0% $0-$41,675 $0-$83,350 $0-$41,675 $0-$55,800
15% $41,675-$459,750 $83,350-$517,200 $41,675-$258,600 $54,101-$488,500
20% >$459,750 >$517,200 >$258,600 >$488,500

Source: Internal Revenue Service

Short-Term Capital Gains Crypto Tax Rates for 2023

If an investor owned a cryptocurrency for less than a year before selling it or using it, the gains are taxed as ordinary income. Additionally, if an individual was paid in crypto, mined crypto, or received crypto via an airdrop, they are taxed as ordinary income. Here are the income tax brackets for the 2022 tax year (taxes filed in 2023):

Short-Term Capital Gains and Income Tax Rates for 2022
Tax Rate Single Married Filing Jointly Married Filing Separately Head of Household
10% $0-$10,275 $0-$20,550 $0-$10,275 $0-$14,650
12% $10,275-$41,775 $20,550-$83,550 $10,275-$41,775 $14,650-$55,900
22% $41,775-$89,075 $83,550-$178,150 $41,775-$89,075 $55,900-$89,050
24% $89,075-$170,050 $178,150-$340,100 $89,075-$170,050 $89,050-$170,050
32% $170,050-$215,950 $340,100-$431,900 $170,050-$215,950 $170,050-$215,950
35% $215,950-$539,900 $431,900-$647,850 $215,950-$539,900 $215,950-$539,900
37% >$539,900 >$647,850 >$539,900 >$539,900

Source: Internal Revenue Service

How to File Taxes on Cryptocurrencies

The most important thing for investors to understand is that they are required to report crypto holdings, gains, and losses to the IRS when filing their tax returns. If a cryptocurrency return is generated — positive or negative — or some type of income is realized from holdings, your crypto activity will need to be reported to the IRS. This is why it’s important to keep track of any and all crypto transactions.

Here are the basic steps to take when filing taxes on cryptocurrencies.

•   Determine what, if anything, is owed. If an investor completed a crypto transaction (selling, exchanging, or using to purchase a good or service), it is likely that it generated a tax liability.

•   Record and report transactions. All cryptocurrency transactions will need to be reported on your tax return. Like with stocks and other investments, the IRS requires a paper trail to ensure an individual reports their full tax liability. In some cases, crypto exchange will provide the transaction history for the investor via a 1099 form, or something similar.

•   File the correct forms with your tax return. The IRS requires specific forms depending on the activity an individual has conducted with their crypto. That could include making calculations on Form 8949 , and then reporting the results on Schedule D of Form 1040 , which outlines and summarizes capital gains or losses

Filing Crypto Taxes on Your Own

It is possible to figure out your crypto tax liabilities, and file on your own. But know that many experts may recommend against this, especially if you’re a particularly active crypto investor or trader. That’s because there can simply be so much information that needs to be reported, that it can be overwhelming for the typical person, and thus, hard to keep track of.

There are services that can help you keep track of your transactions, but if you’re using multiple exchanges or brokerages, and even some decentralized exchanges, you may miss a portion of your activity that needs to be reported.

If you only have a handful of crypto transactions to account for, you may be able to file your crypto taxes yourself. But it may be best to reach out to professionals for help.

How to Lower Crypto Tax Liability

If an investor is looking to lower their crypto tax liability (who isn’t looking for ways to reduce income taxes, and other taxes?), there are several options. Many of the same strategies that are used for traditional investments, like stocks, apply to crypto holdings. Here are a few examples:

Buy and Hold

The buy-and-hold strategy can help investors take advantage of the long-term capital gains tax rate, which is lower than the short-term capital gains tax rate as noted above. When an investor holds on to their crypto for at least one year, their tax rate for the crypto will be lower than if they sold within the first year.

Tax-Loss Harvesting

If a loss is realized on a crypto transaction, it can be used to offset the gains made on other holdings. This is called “tax-loss harvesting,” and is a common tactic used to lower tax liabilities on other investments. However, if an investor’s crypto is somehow stolen or lost, they are out of luck and won’t be able to apply the loss against their gains to lower their liability.

Investors can use tax-loss harvesting for their crypto holdings to offset as much as $3,000 in non-investment income. If they’ve incurred losses beyond that limit, they can carry forward those losses to use in future years.

Also, investors who are concerned about triggering wash sale rules in regards to their crypto sales have no reason to fear. Under current rules, wash sales do not apply to cryptocurrencies. (Though it’s generally expected that this will change at some point in the future.)

Charitable Donations

The IRS classifies crypto as property, and property donations are tax-deductible, and not subject to capital gains taxes.

Here’s how this might work in an investor’s favor: If an investor bought a Bitcoin for $10,000 more than a year ago, and it now has a value of $35,000, they would owe capital gains taxes on that $25,000 gain if they cashed out. But by donating it, they can avoid those capital gains taxes and also take a deduction “generally equal to the fair market value of the virtual currency at the time of the donation if you have held the virtual currency for more than one year,” according to the IRS .

Buy and Sell Cryptocurrency in 401(k) or IRA

Some tax-advantaged retirement accounts like a 401(k) or an IRA allow investors to add cryptocurrencies into their portfolios. In these accounts, no annual taxes are assessed on the transactions, since they enjoy tax-free growth. Investors can therefore take advantage of these benefits to trade within the accounts and not be taxed on every transaction.

However, depending on the type of account used, an investor may face taxes upon withdrawal. For instance, if you were to withdraw money from an IRA account prior to reaching age 59.5, you’d be subject to a 10% penalty.

Recommended: Guide to Bitcoin IRA: Pros, Cons, and What to Know

The Takeaway

Investors need to report their crypto activity to the IRS, and pay applicable tax liabilities. Most crypto activity is subject to capital gains taxes, but depending on the circumstances outlined above, cryptocurrency transactions and investments may be taxed as property, like stocks, or as income.

Investors should keep this in mind, remembering that cryptocurrency tax situations are nuanced and complicated. For that reason, it may be best to reach out to a tax professional for help when filing your taxes. But by keeping track of your crypto holdings and transactions, managing your cryptocurrency tax liabilities shouldn’t be too difficult.

FAQ

How much are crypto taxes?

The amount an investor owes in crypto taxes depends on several factors, including how much trading they did, and how much they profited from those trades. Income taxes may also be applicable, too.

When do your taxes for crypto investments need to be filed?

Investors need to report and pay applicable crypto taxes at the same time that they file their tax return. Generally, that’s due by mid-April, on Tax Day. Investors can ask for an extension, or even sign up for an installment plan if they can’t afford to pay their crypto taxes.

What happens if you don’t pay your crypto taxes?

If you don’t pay your crypto taxes (or fail to report your crypto activity to the IRS), you could incur financial penalties, or even jail time. If caught, you could be facing audits of several years’ of tax returns, and even face serious charges, such as tax evasion.

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.

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

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.

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

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Dec
22
2022
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What Is an Equal-Weighted Index? How to Calculate It

By | Growing Wealth, invest, Investing | Comments Off on What Is an Equal-Weighted Index? How to Calculate It

An equal-weight index gives each constituent the same weight in the index, versus a market-cap-weighted or price-weighted index, where bigger companies (or those trading at higher prices) hold a larger share of the index.

Equal weighting strives to equalize the impact of each company’s performance on the overall index. Traditional market-cap weighting tends to give bigger companies more influence over outcomes.

Equal-weight investing is a smart beta strategy that may appeal to certain types of investors more than others. This article will delve deep into equal-weight investing, including:

•   What Is an Equal Weighted Index?

•   How to Calculate an Equal Weighted Index.

•   Advantages of Using an Equally Weighted Index.

•   Disadvantages of Using an Equally Weighted Index.

What Is an Equal-Weighted Index?

A stock market index tracks the performance of a specific group of stocks or a particular sector of the market. For example, the S&P 500 Composite Stock Price Index tracks the movements of 500 companies that are recognized as leaders within their respective industries.

Stock market indices are often price-weighted or capitalization-weighted.

•   In a price-weighted index, the stocks that have the highest share price carry the most weight. In a capitalization-weighted index, the stocks with the highest market capitalization carry the most weight.

•   Market capitalization represents the value of a company as measured by multiplying the current share price by the total number of outstanding shares.

While some investors may wish to invest in stocks, others may be interested in mutual funds or index funds, which are like a container holding many stocks.

How Equal Weighting Works

An equal-weighted index is a stock market index that gives equal value to all the stocks that are included in it. In other words, each stock in the index has the same importance when determining the index’s value, regardless of whether the company is large or small, or how much shares are trading for.

An equally weighted index essentially puts all of the stocks included in the index on a level playing field when determining the value of the index. With a price-weighted or capitalization-weighted index, on the other hand, higher-priced stocks and larger companies tend to dominate the index’s makeup — and thereby dictate or influence the overall performance of that index.

This in turn influences the performance of corresponding index funds, which track that particular index. Because index funds mirror a benchmark index, they are considered a form of passive investing.

Most exchange traded funds (ETFs) are passive funds that also track an index. Now there are a growing number of actively managed ETFs. While equal-weight ETFs are considered a smart beta strategy, they aren’t fully passive or active in the traditional sense. These funds do track an index, but some active management is required to rebalance the fund and keep the constituents equally weighted.

Examples of Equal-Weight Funds

Equal-weight exchange-traded funds (ETFs) have grown more common as an increasing number of investors show interest in equal-weight funds. Equal weight falls under the umbrella of smart-beta strategies, which refers to any non-market-capitalization strategy.

The term “smart beta” doesn’t mean a particular strategy is better or more effective than others.

Equal-weight funds, for example, are designed to shift the weight of an index and its corresponding funds away from big cap players, which can unduly influence the performance of the index/fund. And while an equal-weight strategy may have improved fund performance in some instances, the results are inconsistent.

Here is a list of the top five equal-weight ETFs by assets under management (AUM), according to ETF.com.

1.    Invesco S&P 500 Equal Weight ETF (RSP )

2.    SPDR S&P Biotech (XBI )

3.    SPDR S&P Oil and Gas Exploration and Production (XOP )

4.    SPDR S&P Global Natural Resources ETF (GNR )

5.    First Trust Cloud Computing ETF (SKYY )

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

Access stock trading, options, auto investing, IRAs, and more. Get started in just a few minutes.

*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.

How to Calculate Equal-Weighted Index

To calculate equal weighted index, you need to know two things:

•   The share price of each stock that’s included in the index

•   Total number of stocks included in the index

If you’re calculating an equally weighted index value for an index that has five stocks in it, each one would be weighted 20%, regardless of its stock price or market capitalization. To find an equal-weighted index value, you would simply add the share price of each stock together, then multiply it by the weight.

So for example, say an index has five stocks priced at $100, $50, $75, $90 and $85. Each one would be weighted at 20%.

Following the formula, you would add each stock’s price together for a total of $400. You’d then multiply that by the 20% weighting to arrive at an equal-weighted value of 80.

As fund turnover occurs and new assets are exchanged for old ones, or as share prices fluctuate, the equally weighted index value must be recalculated.

The equally weighted index formula can be used to determine the value of a particular index. You may want to do this when determining which index ETF to invest in or whether it makes sense to keep a particular index mutual fund in your portfolio.

Advantages of Using an Equally Weighted Index

An index investing strategy might be preferable if you lean toward more conservative investments or you simply want exposure to a broad market index without concentrating on a handful of stocks. That’s something you’re less likely to get with mutual funds or ETFs that follow a price-weighted or capitalization-weighted index.

Here are some of the reasons to consider an equal-weighted index approach:

•   An equal-weight strategy can increase diversification in your portfolio while potentially minimizing exposure to risk.

•   It’s relatively easy to construct an equally weighted portfolio using index mutual funds and ETFs.

•   It may appeal to value investors, since there’s less room for overpriced stocks to be overweighted and undervalued stocks to be underweighted.

•   Equal-weighted indices may potentially generate better or more incremental returns over time compared to price-weighted or capitalization-weighted indices, but there are no guarantees.

Disadvantages of Using Equally Weighted Index

While there are some pros to using an equal weighted approach, it may not always be the best choice depending on your investment goals. In terms of potential drawbacks, there are two big considerations to keep in mind:

•   Equal-weighted index funds or ETFs that have a higher turnover rate may carry higher expenses for investors.

   There is typically a constant buying and selling of assets that goes on behind the scenes to keep an equal-weighted mutual fund or ETF in balance.

   Higher turnover ratios, i.e. how often assets in the fund are swapped in and out, can lead to higher expense ratios if a fund requires more active management. The expense ratio is the price you pay to own a mutual fund or ETF annually, expressed as a percentage of the fund’s assets. The higher the expense ratio, the more of your returns you hand back each year to cover the cost of owning a particular fund.

•   Equal-weighted indices can also be problematic in bear market environments, which are characterized by an overall 20% decline in stock prices. During a recession, cap-weighted funds may outperform equal-weighted funds if the fund is being carried by a few stable, larger companies.

◦   Conversely, an equal-weighted index or fund may miss out on some of the gains when markets are strong and bigger companies outperform.

Advantages

 Disadvantages
Can increase diversification Will typically have higher costs
Constructing an equal-weight portfolio is straightforward May see outsize declines in bear markets
Equal-weight strategies may appeal to value investors May not realize full market gains
Equal-weight strategies may perform better than traditional strategies, but there are no guarantees

The Takeaway

In an equal-weight index, each stock counts equally toward the index’s value, regardless of whether the company is large or small, or what shares are currently trading for. The same is true of any corresponding fund.

There are advantages to investing in an equal-weight index fund over a capitalization-weighted index or price-weighted index. For example, equal-weighted indices may generate better or more consistent returns. Investing in an equal-weight index may be appealing to investors who prefer a value investing strategy or who want to diversify their portfolio to minimize risk.

With a SoFi Invest online trading account, you can begin building your portfolio using SoFi’s streamlined, secure investing app. You can follow a DIY path by choosing which stocks or ETFs to invest in, in addition to many other options including fractional shares, IPO shares, and more. SoFi doesn’t charge any commission, and members have access to complimentary financial advice from professionals.

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

FAQ

How do equal-weight ETFs work?

Like an equal-weight index, an equal-weight ETF holds the same proportion of each of its constituents, which in theory may equalize the impact of different companies’ performance.

When should you buy equal-weighted ETFs?

If you’d like to invest in a certain sector, but you don’t want to be riding the coattails of the biggest companies in that sector because you see the value in other players, you may want to consider an equal-weight ETF.

What is the equally weighted index return?

The return of an equally weighted index would be captured by the performance of an investment in a corresponding index fund or ETF. So if you invest $100 in Equal Weight Fund A, which tracks an equal weight index, and the fund goes up or down by 5%, you would see a 5% gain or loss.

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.

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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woman on tablet in cafe

What Is Mortgage Underwriting?

By | Growing Wealth, Home Ownership, mortgage | Comments Off on What Is Mortgage Underwriting?

Underwriters are a bit like jurors: They soberly weigh the evidence and render a verdict. Unlike jurors, underwriters sometimes reach out to those they are, well, judging to add information, clarify a matter, or otherwise help the case for mortgage approval.

If it’s a “yes” to the address, underwriting has found that you’re fiscally fit enough to take on a mortgage and that it’s a manageable size.

By learning about underwriting, you’ll be prepared for the document-gathering and hurdles ahead.

What Does an Underwriter Do?

Underwriters protect a bank, credit union, or mortgage company by making sure that they only give loan approval to aspiring homeowners who have a good chance of paying the lender back.

Here are some of their tasks:

•   Verify documents and financial information and make sure that enough savings exist to supplement income or contribute toward the down payment.

•   Check an applicant’s credit score and history and note any bankruptcies, late payments, a lot of debt, or other red flags.

•   Calculate the debt-to-income ratio by adding up monthly debt payments and dividing that number by monthly pretax income.

•   Request additional documents and ask questions if necessary. For example, if a homebuyer has had more than one job over the past year and their income is not consistent, an underwriter may want to see more assets.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

What Is the Underwriting Process?

The mortgage-seeking journey is a winding path that eventually arrives at the underwriter.

Automated underwriting may approve your loan application, though a human underwriter will verify your application and documentation. If the software refers your application to manual underwriting, that’s usually a slower process.

Here are common steps leading to underwriting:

1. Explore your budget. Prequalifying for a mortgage is a quick act that will provide a ballpark figure, based on self-reported financial info. And you can employ a home affordability calculator to get a feel for your top price.

Think, too, about lender questions you’ll have during the mortgage process.

2. Get preapproved for a loan. Shop around for the best deal, and best-fitting loan, with a mortgage broker or direct lender.

This is the time to submit documentation of your income, employment, assets, and debts and allow a hard pull of your credit scores. What credit score is needed to buy a house? Much depends on whether you plan to use a conventional or government-backed mortgage loan (an FHA loan is especially more lenient).

A mortgage preapproval letter, often good for 30 to 90 days, indicates the lender’s willingness to lend you a particular amount at a tentative or locked interest rate. A preapproval letter also allows a buyer to act quickly in a seller’s market.

3. Go house hunting. You find a home that meets your needs, and agree on a price.

4. Apply for the loan. You may choose one of the lenders you gained preapproval from, or another lender, to apply for the mortgage. You’ll receive a loan estimate within three business days from each lender you apply with.

If you go with one of the former, you submitted documents in order to get preapproved. Still, the lender will likely ask for further documentation now that you’re ready to act on a purchase, and will take another look at your credit.

5. Wait for the underwriting verdict. A loan processor will confirm your information, and then it’s time for the underwriter to review your credit scores and history, employment history, income, debts, assets, and mortgage amount.

The underwriter will order an appraisal of the chosen property and get a copy of the title insurance, which shows that there are no liens or judgments. Finally, the underwriter will consider your down payment.

Then comes the decision: approved, suspended (more documentation is needed), or denied.

Required Information for Underwriting

Lenders are going to request a lot of documents from mortgage loan applicants.

Income verification. The lender will want to see W-2s from the past two years, your two most recent bank statements, and two most recent pay stubs. Those who are self-employed will need to document stable work and payments and ideally have a business website. Applicants will typically need to show evidence of at least two years of self-employment income in the same field.

Any additional income. Pension, Social Security, alimony, dividends, and the like all count.

Proof of assets. This can include checking and savings accounts, real estate, retirement savings, and personal property. A lender might want to see that a down payment and closing costs have been in an applicant’s account for a while.

Debts. Your debt-to-income ratio matters greatly, so list all monthly debt payments, each creditor’s name and address, account numbers, loan balances, and minimum payment amounts.

Gift letter. If you’ve received money from a family member or another person to put toward the house, the lender will request a gift letter for the mortgage and proof of that funding in your account.

Rent payments. Renters will likely need to show evidence of payments for the past 12 months and give contact information for landlords for two years.

How Long Does Underwriting Take?

Underwriting may take a couple of days to more than a week. It all depends on how complicated someone’s finances are and how busy an underwriter is.

Thankfully, underwriters typically do everything online these days, so an applicant can upload documents to a website or simply email them.

How Can I Improve My Chance of Approval?

Before applicants try to get a mortgage, they can take a number of steps to improve their chances of getting approved.

Lighten the debt load. It’s critical to pay off as much debt as possible and to try to keep your credit utilization ratio below 30%, though some lenders like to see a ratio below 25%.

Applicants can pay off debt faster by making a budget, using cash instead of credit cards to make purchases, and negotiating interest rates with creditors.

Look at credit reports. Applicants should also scour their credit reports and fix any mistakes so that their score is as high as possible. Federal law guarantees the right to access credit reports from each of the three major credit bureaus annually for free.

The reports show only credit history, not credit scores. There are ways to monitor your credit scores and track your money at no cost.

Attempt to boost income. Applicants may want to apply for higher-paying jobs or get to know the benefits of a side hustle so they can save more money.

Ask for a gift or loan partner. You could also ask a family member for a gift to put toward the down payment, or you could ask a relative with a stable credit history and income if they would apply for the loan as a co-borrower or cosigner.

With an underwriter extending a hand, a solution may be found that leads to approval.

The Takeaway

Ready to apply for a mortgage? Prepare for a probing look at your private life — the financial one — by an underwriter, who is gauging the risk of lending you a bundle of money. The underwriter looks at a homebuyer’s finances and history, the loan amount, and the chosen property and renders a verdict.

Mortgage shoppers should add SoFi home loans to their list. Why? Click on the link to see all the life-enhancing perks.

And then find your rate in just minutes.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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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What Is a Decentralized Exchange (DEX)?

What Is a Decentralized Exchange (DEX)?

By | Growing Wealth, invest, Investing | Comments Off on What Is a Decentralized Exchange (DEX)?

A decentralized exchange (DEX) is a digital currency exchange that allows users to buy crypto through direct, peer-to-peer cryptocurrency transactions, all over a online platform without an intermediary. It differs from a traditional centralized exchange, where a typical transaction involves a third-party entity (e.g. bank, trading platform, government institution, etc.) that takes custody of user funds, and oversees the security and transfer of assets between two parties.

Decentralization is a fundamental philosophy of blockchain technology and the crypto space. It redistributes authority from a central power, and places it in the hands of users. And the concept of decentralization is reengineering how many conventional financial services operate.

Decentralized exchanges have also grown in popularity over the past couple of years, with spot trading volume slowly shifting away from centralized exchanges, up until early 2022, when “crypto winter” set in.

Spot Trading Volume Percentage, DEX vs. CEX
Timeframe

 CEX

 DEX
January 2020 98.93% 1.07%
June 2020 97.01% 2.99%
January 2021 93.22% 6.78%
June 2021 93.2% 6.8%
January 2022 77.08% 22.92%
June 2022 82.93% 17.07%

How a Decentralized Exchange (DEX) Works

Decentralized exchanges provide a decentralized platform that allows users to exchange assets without having to trust their funds with another entity.

With a decentralized exchange, a blockchain, or distributed ledger, takes the place of the third party. By moving critical operations onto a blockchain, the underlying technology may help to eliminate single points of failure, allowing users to have greater control of their assets, and support safer and more transparent trading.

DEXs use smart contracts to execute market transactions by allocating transactions’ operations to autonomous code, but there are multiple variations of order fulfillment with differing degrees of decentralization.

Like digital currencies, decentralized exchanges were created in response to flawed and archaic financial systems that passed along risks of a centralized system to its users. Those risks often include insufficient security, technical issues, and a lack of transparency.

💡 Recommended: Crypto Guide for Beginners

Different Types of Decentralized Exchanges

Full decentralization is more of a philosophy than a rule of thumb, as it’s not very practical based on first-layer blockchain scalability limits. As a result, most decentralized exchanges are actually semi-decentralized, using their own servers and off-chain order books to store data and external programs or entities for the exchange of user assets.

Due to this reliance on centralized components, semi-decentralized exchanges’ operations may be subject to government oversight. However, and perhaps most importantly, users still maintain control of the private keys to their funds.

Although DEXs continue to evolve and operate cross-chain with other DApps, DEXs typically operate a single blockchain. One thing all decentralized exchanges have in common is that they execute orders on chains with smart contracts, and at no point do they take custody of users’ funds.

The Different Types of DEXs
Type

 Features
On-Chain Order Books Processes transactions on a blockchain network, without the inclusion of a third-party
Off-Chain Order Books Utilizes an off-chain, centralized entity to process transactions and govern the order book
Automated Market Makers Uses algorithms to automatically price asset pairs in real-time
DEX Aggregators Compile data from numerous DEXs to increase options and liquidity for traders

On-Chain Order Books

For some decentralized exchanges, transactions are processed on-chain, including modifying and canceling orders. Philosophically, this is the most decentralized and transparent process, because it circumvents the need to trust a third party to handle any orders at any time. However, this approach is not very practical in execution.

By placing all stages of an order onto the blockchain, DEXs go through a time-consuming process of asking every node on the network to permanently store the order via miners, as well as pay a fee.

Some criticize the decentralized crypto exchange model because its slow transaction times allow for front-running, which is when an investor watches the price of an asset closely, waiting at the last minute to buy or sell right before they anticipate the price rising or falling. (Note that this type of “front-running” is different from stock front-running, where an investor purchases a security based on insider information, such as a future event that will impact stock price.)

Others counter that since all orders are published on a public ledger, there is no exclusive opportunity for any select individual to front-run from a traditional perspective. However, it has been questioned whether a miner can front-run by noticing an order before it’s confirmed and force their own order to get added to the blockchain first.

Off-Chain Order Books

DEXs with off-chain order books are still decentralized to some degree, but are somewhat more centralized than their on-chain counterparts. As opposed to orders being stored on the blockchain, off-chain orders are posted elsewhere, such as a centralized entity that governs the order book. Such an entity could exploit access to the order books to front-run or misrepresent orders, however, users’ funds would still be protected from the DEXs non-custodial model.

Some ERC-20 tokens on the Ethereum blockchain provide a DEX that operates similarly. Though some degree of decentralization is sacrificed, a DEX can provide a framework for parties to manage off-chain order books through smart contracts. Hosts can then access a larger liquidity pool and relay orders between traders. Once the parties are matched, the trade can be executed on-chain.

These models can be more advantageous for users than relying on slower on-chain order books. With less congestion and quicker confirmation times caused by primitive blockchain iterations, off-chain order books can provide faster speeds.

Automated Market Makers (AMM)

An automated market maker (AMM) reinvents order books with pricing algorithms that automatically price any asset pairing in real-time (e.g. Bitcoin-U.S. dollar).

Unlike traditional market-making, whereby firms provide an accurate price and a tight spread on an order book, AMMs decentralize this process and allow users to create a market on a blockchain. No counterparty is needed to make a trade, as the AMM simply interacts with a blockchain to “create” a market. Instead of transacting directly with another person, exchange, or market-maker, users trade with smart contracts and provide liquidity. Unfortunately, there are no order types on an AMM because prices are algorithmically determined, resulting in a sort of market order.

As with other DEX models, an on-chain transaction must occur to settle any trade. As opposed to some DEXs, AMMs tend to be relatively user-friendly and integrate with popular cryptocurrency wallets.

DEX Aggregators

DEX aggregators are precisely what they sound like: aggregators that compile various trading pools. Their main advantage is that they can increase liquidity for traders, particularly for those who are looking to expand their options or trade smaller tokens.

How these aggregators work is similar to a search engine, in that they compile and accumulate information and data from different exchanges to give users more options.

Tips for Using Decentralized Exchanges

Using a DEX has its advantages and risks. While you’re likely using a DEX for its advantages, it’s important to keep those risks in mind. Perhaps most importantly, remember that decentralized exchanges are, for all intents and purposes, operating off the radar and outside of regulatory authorities.

Also remember that as the popularity of DeFi as a whole grows, so too will the use of DEXs, and their features and functions. These are changing platforms and technologies, so do some research to make sure you know what you’re doing, and that you’re keeping your keys, phrases, and assets safe.

Pros of Decentralized Exchanges

There are many reasons fans and followers of crypto have embraced decentralized exchanges. These are some of the pros of decentralized exchanges:

No KYC/AML or ID Verification

DEXs are trustless, meaning users’ funds, privacy, and limited personal data are well preserved. Decentralized exchange users can easily and securely access a DEX without needing to create an on-exchange account, undergo identity verification, or provide personal information.

No Counterparty Risk

Because users don’t have to transfer their assets to an exchange (or third party), decentralized exchanges can reduce risks of theft and loss of funds due to hacks. DEXs can also prevent price manipulation or fake trading volume, and allow users to maintain a degree of anonymity due to a lack of Know Your Customer (KYC) cryptocurrency rules and regulations.

All Tokens Can be Traded

With a DEX, users can trade new and obscure cryptocurrencies that may be difficult to exchange elsewhere. Typically, centralized exchanges only support a dozen or so projects, and most only support the most popular cryptocurrencies, making smaller and less popular tokens more difficult to trade, especially as those exchanges restrict users from other countries.

Reduced Security Risks

As mentioned, decentralized exchanges may be more secure than their centralized counterparts. That’s because no single entity is in charge of assets, and instead, smart contracts and decentralized applications (dApps) automate transactions. It’s all handled by users, in other words, making it very difficult for a hacker or bad actor to infiltrate a centralized pile of assets and steal them.

That said, a bad or poorly developed smart contract could cause issues, which is something to be aware of.

Utility in the Developing World

Many parts of the world lack basic financial services, nevermind access to the crypto markets. That’s another pro for DEXs, which can be used by individuals anywhere in the world regardless of financial infrastructure.

In fact, DEXs may be the most beneficial to users in the developing world, giving businesses a way to transact assets without the need for a third party, where those parties may not be available or willing to operate.

Cons of a Decentralized Exchange

While decentralized exchanges offer some groundbreaking benefits, they also come with a few drawbacks.

Specific Knowledge Is Required

There’s no getting around it: You’ll need to know what you’re doing, at least to a degree, to use a decentralized exchange. Centralized exchanges exist for a reason: They’re relatively easy to use, and handle most of the complicated stuff for users. But when using a DEX, it’s all on the user. There’s no hand-holding, and as such, you’ll want to be confident that you know the ropes before using a DEX.

Smart Contract Vulnerabilities

Another thing we previously mentioned is the fact that smart contracts may be poorly constructed, leading to problems on a DEX. A smart contract is only as smart as the person or entity that created it, and there’s no guarantee that it will work as hoped all of the time.

Smart contracts themselves are similar to bits of code or commands that automate a process, and if there’s an error in the smart contract, it could produce unanticipated results.

No Recovery Ability

Unlike centralized exchanges run by private companies with employees, DEXs fundamentally have no recovery ability for lost, stolen, or misplaced funds. Due to a lack of a KYC process or ability to cancel a transaction in the event of a compromised account or loss of private key, users are unable to recover data or be returned their assets.

As discussed, there is no support team or help hotline to notify of missing funds or a lost private key, as users themselves are in control of the process. Because all transactions are processed and stored in smart contracts on the blockchain without any owners or overseers, refunds are incompatible with the network’s model and users are generally unable to regain access to their assets.

Unvetted Token Listings

The crypto space is rife with scams and junk tokens, and given that there’s no central authority in a DEX, it’s relatively easy for some of those junk tokens or coins to find themselves in the listings. Put another way: There is little or no vetting process for what’s listed on a DEX (though it may differ from exchange to exchange). Making sure you’re not falling for a scam coin, then, is on the user.

Low Liquidity

Many traders prefer centralized services with a greater liquidity pool, choice of instruments, currency pairs, and order types. Decentralized exchanges usually have lower liquidity than centralized platforms because they are newer and smaller, with a smaller potential client base (since DEXs are more difficult to use than CEXs). Yet, paradoxically, they must also attract new users to generate more liquidity.

Limited Speed

Transactions take time to be checked and validated on a blockchain network, and the processing speed depends on the network’s miners or validators, not the exchange itself.

Limited Trading Functionality

Decentralized exchanges tend to focus on executing simple buy and sell orders. As such, users may find advanced trading functions such as stop losses, margin trading, and lending are unavailable on most DEXs.

Scalability Issues

DEXs have suffered from the same network congestion issues relating to scalability issues as their underlying blockchain networks like Ethereum. Ethereum’s first network iteration, like other blockchains, was built to function securely at a smaller scale before scaling solutions were later implemented. Though a transformative network upgrade designed with massive scalability solutions has been in development since 2018, DEXs remain subject to first-layer network transaction ceilings.

Challenges to DEX Adoption

With sophisticated technology, potentially fewer blockchain security risks, and the ability to self-custody funds, further adoption of decentralized exchanges seems likely. But DEXs, for the most part, remain out of the mainstream. Despite the launch and rise in popularity of numerous DEXs within the past few years, some factors may slow down adoption.

Many investors may lack awareness surrounding:

•   The security risks of centralized exchanges

•   Self-custody as a security option

•   How to securely self-custody funds (managing private keys)

•   The existence of decentralized exchanges

•   The advantages of decentralized exchanges

DEXs also present a few technical barriers to entry:

•   Not user-friendly enough

•   Network congestion during periods of high volume

•   Transactions on current network iterations take time to be validated on blockchains

•   High transactions fees during periods of high volume

•   Users will only join a DEX with high liquidity

•   Cross-chain interoperability must exist for DeFi platforms to interact with each other

•   The need for fiat on-ramps and less volatile token prices

The Takeaway

Decentralized exchanges are a trustless solution that allows users to buy and sell cryptocurrency without roping in a third party. Though full decentralization is not yet a reality, different types of DEXs provide varying levels of security, privacy, and efficiency from which crypto traders can choose.

As DEXs continue to develop, evolve, and become more practical for users, user adoption may become a focal point as DEXs look to offer greater liquidity. The good news is that DEXs present only one of numerous ways to get involved in the crypto space.

FAQ

How do DEX fees work?

A DEX facilitates peer-to-peer trading, and levies network fees in order to facilitate those transactions. While fees from DEX to DEX may vary, they differ from centralized exchanges, which may charge trading fees or commissions for executing transactions.

What’s the difference between a decentralized exchange (DEX) and a centralized exchange (CEX)?

A decentralized exchange allows individual users to connect and transact assets without a third party. A centralized exchange, conversely, acts as a third party and takes custody of funds or assets during the transaction. The key difference is that a CEX acts as a central authority.

Are decentralized exchanges legal?

Yes, DEXs are legal, though they do operate in something of a gray area (like most of the crypto space) in that they’re unregulated by a central government authority. Some exchanges may be illegal in certain jurisdictions, too. That may change in the future, though, as regulators outline plans and potential rules for the crypto space.

How can I create a decentralized exchange?

If you want to create your own DEX, you’ll need a lot of background knowledge involving blockchain architecture and more. You would need to know how to code, identify key features that your DEX would have, and much, much more. You’re likely better off using an existing DEX, rather than creating one from scratch.

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.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

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